Western Digital (WDC) 11/17/09 PriceWatch Alert At $36.66 Break Even

Posted: Tuesday, November 17, 2009 8:34 AM EDT
By: Market Intelligence Center Staff

Western Digital (NYSE: WDC) closed yesterday at $39.16. So far the stock has hit a 52-week low of $9.48 and 52-week high of $39.38. Western Digital stock has been showing support around 38.40 and resistance in the 39.76 range. Technical indicators for the stock are Bullish and S&P gives WDC a positive 4 STAR (out of 5) buy rating. WDC appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 39 covered call (WDC AM) for a net debit in the $36.66 area. That is also the break even stock price for this trade. This covered call has a 60 day duration, provides 6.38% downside protection and a 6.38% assigned return rate for a 38.83% 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 WDC Jan '11 12.50 Call (ZCO AV) and selling the Jan '10 39 call (WDC AM) for a $24.45 debit. The trade has a 60 day life and would provide 5.64% downside protection and an 8.38% assigned return rate for a 51.00% annualized return rate (for comparison purposes only). Western Digital does not pay dividends at this time. [ATU-Seven Summits Research]