Hartford Financial (HIG) 10/28/09 PriceWatch Alert Targets 24.91% Downside Protection

Posted: Wednesday, October 28, 2009 8:03 AM EDT
By: Market Intelligence Center Staff

Hartford Financial (NYSE: HIG) closed yesterday at $24.09. So far the stock has hit a 52-week low of $3.33 and 52-week high of $29.59. Hartford Financial stock has been showing support around 23.30 and resistance in the 25.48 range. Technical indicators for the stock are Bearish and S&P gives HIG a neutral 3 STAR (out of 5) hold rating. HIG appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 19 covered call (HIG AS) for a net debit in the $18.09 area. That is also the break even stock price for this trade. This covered call has an 80 day duration, provides 24.91% downside protection and a 5.03% assigned return rate for a 22.95% 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 HIG Jan '11 2.50 Call (OZJ AZ) and selling the Jan '10 19 call (HIG AS) for a $15.80 debit. The trade has an 80 day life and would provide 24.03% downside protection and a 4.43% assigned return rate for a 20.00% annualized return rate (for comparison purposes only). Hartford Financial has a current annual dividend yield of 0.77%. [WBA-Seven Summits Research]