Block (H&R) Inc. (HRB) presents a trading opportunity that offers a 3.54% return in just 87 days.
A covered call on H&R Block at the $31.00 level expiring on Jul. '15 offers an assigned return rate of 3.54% or 14.85% annualized. This trade offers 5.82% downside protection, and offers some profit so long as the stock closes above $29.94 at expiration.
A lower-cost hedged trade on H&R Block, would involve buying the Jan. '16 $18.00 for about $13.85 instead of taking a long position on HRB and pairing it with the same sold call. This positions costs $12.00 instead of the $29.94 it costs to initiated the covered call. This trade has an assigned return rate of 8.33%. In this position the stock can fall by 5.63% before any losses are incurred. This trade has an assigned return rate of 8.33% or 35% annualized (for comparison purposes only).
H&R Block has traded between $26.99 and $35.80 over the last 52 weeks and traded between $31.24 and $32.17 Monday. Technical indicators are bearish and support has been near $30.80 and resistance has been around $32.66. S&P gives the stock a 3 STARS (out of 5) hold ranking and has a $32.00 12-month target price.