AFLAC (AFL) 11/3/09 PriceWatch Alert Targets 8.23% Downside Protection

Posted: Tuesday, November 03, 2009 8:42 AM EDT
By: Market Intelligence Center Staff

AFLAC (NYSE: AFL) closed yesterday at $41.32. So far the stock has hit a 52-week low of $10.83 and 52-week high of $49.36. AFLAC stock has been showing support around 39.30 and resistance in the 43.46 range. Technical indicators for the stock are Bearish and S&P gives AFL a neutral 3 STAR (out of 5) hold rating. AFL appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Feb '10 42 covered call (AJO BZ) for a net debit in the $37.92 area. That is also the break even stock price for this trade. This covered call has a 109 day duration, provides 8.23% downside protection and a 10.76% assigned return rate for a 36.03% 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 AFL Jan '11 22.50 Call (ZUR AX) and selling the Feb '10 42 call (AJO BZ) for a $15.95 debit. The trade has a 109 day life and would provide 6.95% downside protection and a 22.26% assigned return rate for a 75.00% annualized return rate (for comparison purposes only). AFLAC has a current annual dividend yield of 2.59%. [ATU-Seven Summits Research]