Western Union (WU) 11/3/09 PriceWatch Alert With $16.59 Break Even

Posted: Tuesday, November 03, 2009 8:34 AM EDT

Western Union (NYSE: WU) closed yesterday at $18.59. So far the stock has hit a 52-week low of $10.05 and 52-week high of $20.64. Western Union stock has been showing support around 17.91 and resistance in the 18.99 range. Technical indicators for the stock are Neutral and S&P gives WU a neutral 3 STAR (out of 5) hold rating. WU appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Feb '10 17.50 covered call (WU BW) for a net debit in the $16.59 area. That is also the break even stock price for this trade. This covered call has a 109 day duration, provides 10.76% downside protection and a 5.49% assigned return rate for an 18.37% 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 WU Jan '11 7.50 Call (ZZH AU) and selling the Feb '10 17.50 call (WU BW) for a $9.35 debit. The trade has a 109 day life and would provide 9.36% downside protection and a 6.95% assigned return rate for a 23.00% annualized return rate (for comparison purposes only). Western Union has a current annual dividend yield of 0.21%. [ATU-Seven Summits Research]

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