Wells Fargo (WFC) PriceWatch Alert Up To 19.19% Return

Posted: Monday, July 06, 2009 8:07 AM EDT

Wells Fargo (NYSE: WFC) closed yesterday at $23.08. So far the stock has hit a 52-week low of $7.80 and 52-week high of $44.75. Wells Fargo stock has been showing support around 22.51 and resistance in the 24.17 range. Technical indicators for the stock are Bearish and S&P gives WFC a neutral 3 STAR (out of 5) hold rating. WFC appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jan '10 17.50 covered call (WFC AT) for a net debit in the $15.88 area. That is also the break even stock price for this trade. This covered call has a 194 day duration, provides 31.20% downside protection and a 10.20% assigned return rate for a 19.19% 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 WFC Jan '11 7.50 Call (VWF AU) and selling the Jan '10 17.50 call (WFC AT) for a $9.05 debit. The trade has a 194 day life and would provide 28.29% downside protection and a 10.50% assigned return rate for a 20.00% annualized return rate (for comparison purposes only). Wells Fargo has a current annual dividend yield of 0.82%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]

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