Zimmer (ZMH) 11/3/09 PriceWatch Alert Down To $50.92 Break Even

Posted: Tuesday, November 03, 2009 8:32 AM EDT
By: Market Intelligence Center Staff

Zimmer (NYSE: ZMH) closed yesterday at $52.77. So far the stock has hit a 52-week low of $30.67 and 52-week high of $55.76. Zimmer stock has been showing support around 51.74 and resistance in the 53.84 range. Technical indicators for the stock are Bullish and S&P gives ZMH a positive 4 STAR (out of 5) buy rating. ZMH appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 55 covered call (ZMH AK) for a net debit in the $50.92 area. That is also the break even stock price for this trade. This covered call has a 74 day duration, provides 3.51% downside protection and an 8.01% assigned return rate for a 39.52% 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 ZMH Jan '11 30 Call (OFH AF) and selling the Jan '10 55 call (ZMH AK) for a $22.65 debit. The trade has a 74 day life and would provide 0.23% downside protection and a 10.38% assigned return rate for a 51.00% annualized return rate (for comparison purposes only). Zimmer does not pay dividends at this time. [ATU-Seven Summits Research]