Quest Diagnostics (DGX) PriceWatch Alert Targets 7.27% Downside Protection

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

Quest Diagnostics (NYSE: DGX) closed yesterday at $55.00. So far the stock has hit a 52-week low of $38.66 and 52-week high of $59.95. Quest Diagnostics stock has been showing support around 54.03 and resistance in the 56.73 range. Technical indicators for the stock are Bullish and S&P gives DGX a positive 4 STAR (out of 5) buy rating. DGX appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Nov '09 55 covered call (DGX KK) for a net debit in the $51.00 area. That is also the break even stock price for this trade. This covered call has a 138 day duration, provides 7.27% downside protection and a 7.84% assigned return rate for a 20.74% 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 DGX Jan '11 30 Call (OGJ AF) and selling the Nov '09 55 call (DGX KK) for a $22.55 debit. The trade has a 138 day life and would provide 4.45% downside protection and a 10.86% assigned return rate for a 29.00% annualized return rate (for comparison purposes only). Quest Diagnostics has a current annual dividend yield of 0.71%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]

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