UnitedHealth Group (UNH) 10/28/09 PriceWatch Alert Up To 12.83% Downside Protection

Posted: Wednesday, October 28, 2009 8:07 AM EDT
By: Market Intelligence Center Staff

UnitedHealth Group (NYSE: UNH) closed yesterday at $26.50. 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 24.55 and resistance in the 27.77 range. Technical indicators for the stock are Bullish and S&P gives UNH a positive 4 STAR (out of 5) buy rating. UNH appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jun '10 27 covered call (UNH FS) for a net debit in the $23.10 area. That is also the break even stock price for this trade. This covered call has a 234 day duration, provides 12.83% downside protection and a 16.88% assigned return rate for a 26.33% 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 17.50 Call (VUH AW) and selling the Jun '10 27 call (UNH FS) for a $7.05 debit. The trade has a 234 day life and would provide 7.36% downside protection and a 34.75% assigned return rate for a 54.00% annualized return rate (for comparison purposes only). UnitedHealth Group has a current annual dividend yield of 0.12%. [WBA-Seven Summits Research]