GlaxoSmithKline PLC (GSK) 11/16/09 PriceWatch Alert Up To 14.71% Return

Posted: Monday, November 16, 2009 8:13 AM EDT
By: Market Intelligence Center Staff

GlaxoSmithKline PLC (NYSE: GSK) ended the last trading session at $41.44. So far the stock has hit a 52-week low of $27.15 and 52-week high of $42.18. GlaxoSmithKline PLC stock has been showing support around 40.98 and resistance in the 42.06 range. Technical indicators for the stock are Bullish and S&P gives GSK a neutral 3 STAR (out of 5) hold rating. GSK appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 40 covered call (GSK AH) for a net debit in the $39.04 area. That is also the break even stock price for this trade. This covered call has a 61 day duration, provides 5.79% downside protection and a 2.46% assigned return rate for a 14.71% 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 GSK Jan '11 20 Call (VLX AD) and selling the Jan '10 40 call (GSK AH) for a $19.60 debit. The trade has a 61 day life and would provide 4.44% downside protection and a 2.04% assigned return rate for a 12.00% annualized return rate (for comparison purposes only). GlaxoSmithKline PLC has a current annual dividend yield of 4.50%. [ABR-Seven Summits Research]