UnitedHealth Group (UNH) 10/20/09 PriceWatch Alert Up To 23.58% Return

Posted: Tuesday, October 20, 2009 8:31 AM EDT

UnitedHealth Group (NYSE: UNH) closed yesterday at $24.92. So far the stock has hit a 52-week low of $15.19 and 52-week high of $30.25. UnitedHealth Group stock has been showing support around 24.19 and resistance in the 25.35 range. Technical indicators for the stock are Bearish and S&P gives UNH a neutral 3 STAR (out of 5) hold rating. UNH appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jun '10 25 covered call (UHB FE) for a net debit in the $21.62 area. That is also the break even stock price for this trade. This covered call has a 242 day duration, provides 13.24% downside protection and a 15.63% assigned return rate for a 23.58% 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 UNH Jan '11 15 Call (VUH AC) and selling the Jun '10 25 call (UHB FE) for a $7.80 debit. The trade has a 242 day life and would provide 8.51% downside protection and a 28.21% assigned return rate for a 43.00% annualized return rate (for comparison purposes only). UnitedHealth Group has a current annual dividend yield of 0.12%. [ATU-Seven Summits Research]

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