Varian Medical System (VAR) 11/6/09 PriceWatch Alert Support At Around $42.57

Posted: Friday, November 06, 2009 8:21 AM EDT
By: Market Intelligence Center Staff

Varian Medical System (NYSE: VAR) closed yesterday at $43.72. So far the stock has hit a 52-week low of $27.10 and 52-week high of $44.53. Varian Medical System stock has been showing support around 42.57 and resistance in the 44.29 range. Technical indicators for the stock are Bullish and S&P gives VAR a neutral 3 STAR (out of 5) hold rating. VAR appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Feb '10 40 covered call (VAR BH) for a net debit in the $38.72 area. That is also the break even stock price for this trade. This covered call has a 106 day duration, provides 11.44% downside protection and a 3.31% assigned return rate for an 11.38% 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 VAR Jan '11 20 Call (ZMX AD) and selling the Feb '10 40 call (VAR BH) for a $19.10 debit. The trade has a 106 day life and would provide 10.57% downside protection and a 4.71% assigned return rate for a 16.00% annualized return rate (for comparison purposes only). Varian Medical System does not pay dividends at this time. [FBB-Seven Summits Research]