Automatic Data Processing (ADP) PriceWatch Alert Bullish Price Movement

Posted on Monday, September 08, 2008 8:07 AM

Automatic Data Processing (NYSE: ADP) ended the last trading session at $44.16. So far the stock has hit a 52-week low of $37.74 and 52-week high of $49.81. Automatic Data Processing stock has been showing support around 43.27 and resistance in the 44.73 range. Technical indicators for the stock are Bullish and S&P gives ADP a positive 4 STAR (out of 5) buy rating. ADP appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Nov '08 45 covered call (ADP KI) for a net debit in the $42.61 area. That is also the break even stock price for this trade. This covered call has a 75 day duration, provides 3.51% downside protection and a 5.61% assigned return rate for a 27.30% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the ADP Jan '10 30 Call (WWF AF) and selling the Nov '08 45 call (ADP KI) for a $13.10 debit. The trade has a 75 day life and would provide 2.40% downside protection and a 14.50% assigned return rate for a 71.00% annualized return rate (for comparison purposes only). Automatic Data Processing has a current annual dividend yield of 2.57%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]