Wells Fargo (WFC) 11/19/09 PriceWatch Alert Up To 19.75% Return

Posted: Thursday, November 19, 2009 8:02 AM EDT
By: Market Intelligence Center Staff

Wells Fargo (NYSE: WFC) closed yesterday at $28.86. So far the stock has hit a 52-week low of $7.80 and 52-week high of $32.76. Wells Fargo stock has been showing support around 28.03 and resistance in the 29.35 range. Technical indicators for the stock are Bullish and S&P gives WFC a neutral 3 STAR (out of 5) hold rating. WFC appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at an Apr '10 26 covered call (FHU DZ) for a net debit in the $24.06 area. That is also the break even stock price for this trade. This covered call has a 149 day duration, provides 16.63% downside protection and an 8.06% assigned return rate for a 19.75% 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 WFC Jan '11 7.50 Call (VWF AU) and selling the Apr '10 26 call (FHU DZ) for a $16.55 debit. The trade has a 149 day life and would provide 16.67% downside protection and an 11.78% assigned return rate for a 29.00% annualized return rate (for comparison purposes only). Wells Fargo has a current annual dividend yield of 0.71%. [THA-Seven Summits Research]