Western Digital (WDC) 11/18/09 PriceWatch Alert Up To 32.74% Return

Posted: Wednesday, November 18, 2009 8:46 AM EDT
By: Market Intelligence Center Staff

Western Digital (NYSE: WDC) closed yesterday at $39.09. 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 38.26 and resistance in the 39.56 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 38 covered call (WDC AK) for a net debit in the $36.09 area. That is also the break even stock price for this trade. This covered call has a 59 day duration, provides 7.67% downside protection and a 5.29% assigned return rate for a 32.74% 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 15 Call (ZCO AC) and selling the Jan '10 38 call (WDC AK) for a $21.45 debit. The trade has a 59 day life and would provide 6.75% downside protection and a 7.23% assigned return rate for a 45.00% annualized return rate (for comparison purposes only). Western Digital does not pay dividends at this time. [WBA-Seven Summits Research]