Coventry Healthcare (CVH) 11/13/09 PriceWatch Alert Down To $18.51 Break Even

Posted: Friday, November 13, 2009 8:24 AM EDT
By: Market Intelligence Center Staff

Coventry Healthcare (NYSE: CVH) closed yesterday at $22.71. So far the stock has hit a 52-week low of $7.97 and 52-week high of $24.84. Coventry Healthcare stock has been showing support around 22.24 and resistance in the 23.54 range. Technical indicators for the stock are Bullish and S&P gives CVH a positive 4 STAR (out of 5) buy rating. CVH appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 20 covered call (CVH DD) for a net debit in the $18.51 area. That is also the break even stock price for this trade. This covered call has a 155 day duration, provides 18.49% downside protection and an 8.05% assigned return rate for an 18.96% 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 CVH Jan '11 7.50 Call (OVB AU) and selling the Apr '10 20 call (CVH DD) for an $11.80 debit. The trade has a 155 day life and would provide 15.02% downside protection and a 5.93% assigned return rate for a 14.00% annualized return rate (for comparison purposes only). Coventry Healthcare does not pay dividends at this time. [FBB-Seven Summits Research]