Union Pacific (UNP) PriceWatch Alert Targets 18.88% Return

Posted: Wednesday, August 19, 2009 8:02 AM EDT
By: Market Intelligence Center Staff

Union Pacific (NYSE: UNP) closed yesterday at $59.55. 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 58.41 and resistance in the 60.57 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 55 covered call (UNP KK) for a net debit in the $52.45 area. That is also the break even stock price for this trade. This covered call has a 94 day duration, provides 11.92% downside protection and a 4.86% assigned return rate for an 18.88% 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 30 Call (VUJ AF) and selling the Nov '09 55 call (UNP KK) for a $22.90 debit. The trade has a 94 day life and would provide 11.17% downside protection and a 9.17% assigned return rate for a 36.00% 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]