Western Digital (WDC) PriceWatch Alert Targets 15.26% Downside Protection

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

Western Digital (NYSE: WDC) closed yesterday at $26.22. So far the stock has hit a 52-week low of $9.48 and 52-week high of $36.15. Western Digital stock has been showing support around 24.86 and resistance in the 27.68 range. Technical indicators for the stock are Bullish and S&P gives WDC a weak 2 STAR (out of 5) sell rating. WDC appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 25 covered call (WDC AE) for a net debit in the $22.22 area. That is also the break even stock price for this trade. This covered call has a 194 day duration, provides 15.26% downside protection and a 12.51% assigned return rate for a 23.54% 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 WDC Jan '11 12.50 Call (ZCO AV) and selling the Jan '10 25 call (WDC AE) for a $10.70 debit. The trade has a 194 day life and would provide 11.52% downside protection and a 16.82% assigned return rate for a 32.00% annualized return rate (for comparison purposes only). Western Digital does not pay dividends at this time. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]

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