Johnson and Johnson (JNJ) 10/6/09 PriceWatch Alert Up To 3.79% Return

Posted: Tuesday, October 06, 2009 8:36 AM EDT
By: Market Intelligence Center Staff

Johnson and Johnson (NYSE: JNJ) closed yesterday at $59.82. So far the stock has hit a 52-week low of $46.25 and 52-week high of $67.48. Johnson and Johnson stock has been showing support around 59.24 and resistance in the 60.22 range. Technical indicators for the stock are Bearish and S&P gives JNJ a positive 4 STAR (out of 5) buy rating. JNJ appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at an Apr '10 55 covered call (JNJ DK) for a net debit in the $53.92 area. That is also the break even stock price for this trade. This covered call has a 193 day duration, provides 9.86% downside protection and a 2.00% assigned return rate for a 3.79% 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 JNJ Jan '11 45 Call (VJN AI) and selling the Apr '10 55 call (JNJ DK) for a $9.30 debit. The trade has a 193 day life and would provide 9.23% downside protection and a 7.53% assigned return rate for a 14.00% annualized return rate (for comparison purposes only). Johnson and Johnson has a current annual dividend yield of 3.28%. [ATU-Seven Summits Research]