Wells Fargo (WFC) 11/12/09 PriceWatch Alert Down To $24.95 Break Even

Posted: Thursday, November 12, 2009 8:30 AM EDT
By: Market Intelligence Center Staff

Wells Fargo (NYSE: WFC) closed yesterday at $28.80. 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 27.85 and resistance in the 29.61 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 26 covered call (FHU AZ) for a net debit in the $24.95 area. That is also the break even stock price for this trade. This covered call has a 65 day duration, provides 13.37% downside protection and a 4.21% assigned return rate for a 23.63% 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 7.50 Call (VWF AU) and selling the Jan '10 26 call (FHU AZ) for a $17.65 debit. The trade has a 65 day life and would provide 12.67% downside protection and a 4.82% assigned return rate for a 27.00% annualized return rate (for comparison purposes only). Wells Fargo has a current annual dividend yield of 0.70%. [THA-Seven Summits Research]