Quest Diagnostics (DGX) 11/19/09 PriceWatch Alert Support At Around $57.99

Posted: Thursday, November 19, 2009 8:03 AM EDT
By: Market Intelligence Center Staff

Quest Diagnostics (NYSE: DGX) closed yesterday at $58.48. So far the stock has hit a 52-week low of $40.00 and 52-week high of $59.57. Quest Diagnostics stock has been showing support around 57.99 and resistance in the 59.39 range. Technical indicators for the stock are Bullish and S&P gives DGX a positive 4 STAR (out of 5) buy rating. DGX appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jan '10 60 covered call (DGX AL) for a net debit in the $57.08 area. That is also the break even stock price for this trade. This covered call has a 58 day duration, provides 2.39% downside protection and a 5.12% assigned return rate for a 32.19% 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 DGX Jan '11 40 Call (OGJ AH) and selling the Jan '10 60 call (DGX AL) for an $18.30 debit. The trade has a 58 day life and would provide 0.31% downside protection and a 9.29% assigned return rate for a 58.00% annualized return rate (for comparison purposes only). Quest Diagnostics has a current annual dividend yield of 0.67%. [THA-Seven Summits Research]