Union Pacific (UNP) PriceWatch Alert Up To 8.22% Downside Protection

Posted: Monday, August 17, 2009 8:10 AM EDT
By: Market Intelligence Center Staff

Union Pacific (NYSE: UNP) closed yesterday at $60.82. So far the stock has hit a 52-week low of $33.28 and 52-week high of $85.80. Union Pacific stock has been showing support around 59.43 and resistance in the 62.11 range. Technical indicators for the stock are Bullish and S&P gives UNP a neutral 3 STAR (out of 5) hold rating. UNP appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Nov '09 60 covered call (UNP KL) for a net debit in the $55.82 area. That is also the break even stock price for this trade. This covered call has a 96 day duration, provides 8.22% downside protection and a 7.49% assigned return rate for a 28.47% 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 UNP Jan '11 35 Call (VUJ AG) and selling the Nov '09 60 call (UNP KL) for a $21.65 debit. The trade has a 96 day life and would provide 6.86% downside protection and a 15.47% assigned return rate for a 59.00% annualized return rate (for comparison purposes only). Union Pacific has a current annual dividend yield of 1.78%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]