USB Capital (USB) PriceWatch Alert Targets 21.92% Return

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

USB Capital (NYSE: USB) closed yesterday at $17.04. So far the stock has hit a 52-week low of $8.06 and 52-week high of $42.23. USB Capital stock has been showing support around 16.72 and resistance in the 17.68 range. Technical indicators for the stock are Bearish and S&P gives USB a weak 2 STAR (out of 5) sell rating. USB appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Dec '09 15 covered call (USB LC) for a net debit in the $13.64 area. That is also the break even stock price for this trade. This covered call has a 166 day duration, provides 19.95% downside protection and a 9.97% assigned return rate for a 21.92% 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 USB Jan '11 5 Call (VBG AA) and selling the Dec '09 15 call (USB LC) for a $9.15 debit. The trade has a 166 day life and would provide 16.96% downside protection and a 9.29% assigned return rate for a 20.00% annualized return rate (for comparison purposes only). USB Capital has a current annual dividend yield of 1.10%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]