Waste Management (WMI) PriceWatch Alert Down To $28.52 Break Even

Posted: Friday, July 24, 2009 8:07 AM EDT
By: Market Intelligence Center Staff

Waste Management (NYSE: WMI) closed yesterday at $29.52. So far the stock has hit a 52-week low of $22.10 and 52-week high of $36.92. Waste Management stock has been showing support around 28.27 and resistance in the 30.27 range. Technical indicators for the stock are Bullish and S&P gives WMI a positive 4 STAR (out of 5) buy rating. WMI appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at an Oct '09 30 covered call (WMI JF) for a net debit in the $28.52 area. That is also the break even stock price for this trade. This covered call has an 85 day duration, provides 3.39% downside protection and a 5.19% assigned return rate for a 22.28% 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 WMI Jan '11 20 Call (VUW AD) and selling the Oct '09 30 call (WMI JF) for an $8.85 debit. The trade has an 85 day life and would provide 2.27% downside protection and a 12.99% assigned return rate for a 56.00% annualized return rate (for comparison purposes only). Waste Management has a current annual dividend yield of 4.13%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]