Shire Plc (SHPGY) 11/3/09 PriceWatch Alert Could Hit 19.59% Return

Posted: Tuesday, November 03, 2009 8:45 AM EDT
By: Market Intelligence Center Staff

Shire Plc (NasdaqNM: SHPGY) closed yesterday at $52.49. So far the stock has hit a 52-week low of $31.66 and 52-week high of $54.06. Shire Plc stock has been showing support around 51.12 and resistance in the 53.66 range. Technical indicators for the stock are Bullish and S&P gives SHPGY a weak 2 STAR (out of 5) sell rating. SHPGY appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 50 covered call (UGH AJ) for a net debit in the $48.09 area. That is also the break even stock price for this trade. This covered call has a 74 day duration, provides 8.38% downside protection and a 3.97% assigned return rate for a 19.59% 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 SHPGY Jan '11 30 Call (OTK AF) and selling the Jan '10 50 call (UGH AJ) for a $19.15 debit. The trade has a 74 day life and would provide 6.36% downside protection and a 4.44% assigned return rate for a 22.00% annualized return rate (for comparison purposes only). Shire Plc has a current annual dividend yield of 0.58%. [ATU-Seven Summits Research]