CIGNA (CI) 10/28/09 PriceWatch Alert Up To 13.62% Downside Protection

Posted: Wednesday, October 28, 2009 8:43 AM EDT

CIGNA (NYSE: CI) closed yesterday at $28.63. So far the stock has hit a 52-week low of $8.00 and 52-week high of $33.00. CIGNA stock has been showing support around 26.45 and resistance in the 30.13 range. Technical indicators for the stock are Bearish and S&P gives CI a neutral 3 STAR (out of 5) hold rating. CI appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 28 covered call (CI DM) for a net debit in the $24.73 area. That is also the break even stock price for this trade. This covered call has a 171 day duration, provides 13.62% downside protection and a 13.22% assigned return rate for a 28.22% 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 CI Jan '11 17.50 Call (ZCN AW) and selling the Apr '10 28 call (CI DM) for an $8.75 debit. The trade has a 171 day life and would provide 8.31% downside protection and a 20.00% assigned return rate for a 43.00% annualized return rate (for comparison purposes only). CIGNA has a current annual dividend yield of 0.14%. [WBA-Seven Summits Research]

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