United Parcel Service (UPS) PriceWatch Alert At $46.00 Break Even

Posted: Monday, July 06, 2009 8:07 AM EDT
By: Market Intelligence Center Staff

United Parcel Service (NYSE: UPS) closed yesterday at $48.60. So far the stock has hit a 52-week low of $37.99 and 52-week high of $70.00. United Parcel Service stock has been showing support around 47.49 and resistance in the 50.83 range. Technical indicators for the stock are Bearish and S&P gives UPS a neutral 3 STAR (out of 5) hold rating. UPS appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at an Oct '09 50 covered call (UPS JJ) for a net debit in the $46.00 area. That is also the break even stock price for this trade. This covered call has a 103 day duration, provides 5.35% downside protection and an 8.70% assigned return rate for a 30.81% 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 UPS Jan '11 35 Call (OPS AG) and selling the Oct '09 50 call (UPS JJ) for a $12.40 debit. The trade has a 103 day life and would provide 2.47% downside protection and a 20.97% assigned return rate for a 74.00% annualized return rate (for comparison purposes only). United Parcel Service has a current annual dividend yield of 3.58%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]