US Bancorp (USB) 11/19/09 PriceWatch Alert Targets 19.97% Return

Posted: Thursday, November 19, 2009 8:04 AM EDT
By: Market Intelligence Center Staff

US Bancorp (NYSE: USB) closed yesterday at $23.61. So far the stock has hit a 52-week low of $8.06 and 52-week high of $29.90. US Bancorp stock has been showing support around 23.16 and resistance in the 23.98 range. Technical indicators for the stock are Bullish and S&P gives USB a neutral 3 STAR (out of 5) hold rating. USB appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jun '10 23 covered call (UEE FW) for a net debit in the $20.61 area. That is also the break even stock price for this trade. This covered call has a 212 day duration, provides 12.71% downside protection and an 11.60% assigned return rate for a 19.97% 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 USB Jan '11 15 Call (VBG AC) and selling the Jun '10 23 call (UEE FW) for a $6.55 debit. The trade has a 212 day life and would provide 8.73% downside protection and a 22.14% assigned return rate for a 38.00% annualized return rate (for comparison purposes only). US Bancorp has a current annual dividend yield of 0.86%. [THA-Seven Summits Research]