Wells Fargo (WFC) 11/11/09 PriceWatch Alert Bullish Price Movement

Posted: Wednesday, November 11, 2009 8:42 AM EDT
By: Market Intelligence Center Staff

Wells Fargo (NYSE: WFC) closed yesterday at $28.10. So far the stock has hit a 52-week low of $7.80 and 52-week high of $32.76. Wells Fargo stock has been showing support around 27.64 and resistance in the 28.68 range. Technical indicators for the stock are Bullish and S&P gives WFC a neutral 3 STAR (out of 5) hold rating. WFC appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jan '10 25 covered call (FHU AY) for a net debit in the $24.00 area. That is also the break even stock price for this trade. This covered call has a 66 day duration, provides 14.59% downside protection and a 4.17% assigned return rate for a 23.04% 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 WFC Jan '11 5 Call (VWF AA) and selling the Jan '10 25 call (FHU AY) for a $19.35 debit. The trade has a 66 day life and would provide 13.35% downside protection and a 3.36% assigned return rate for a 19.00% annualized return rate (for comparison purposes only). Wells Fargo has a current annual dividend yield of 0.70%. [WBA-Seven Summits Research]