Weyerhaeuser (WY) Possible Trade From The Investors Observer Hedged Dividend Income List

Posted: Friday, November 20, 2009 8:31 AM EDT
By: Market Intelligence Center Staff

Weyerhaeuser (NYSE: WY) closed yesterday at $38.78. So far the stock has hit a 52-week low of $18.67 and 52-week high of $41.28. Weyerhaeuser stock has been showing support around 37.99 and resistance in the 39.45 range. Technical indicators for the stock are Bullish and S&P gives WY a neutral 3 STAR (out of 5) hold rating. WY appears on the Investors Observer Hedged Dividend Income list. For a hedged play on this stock, look at a Jan '10 38 covered call (WY AD) for a net debit in the $36.08 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 6.96% downside protection and a 5.32% assigned return rate for a 34.08% 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 WY Jan '11 15 Call (OMZ AZ) and selling the Jan '10 38 call (WY AD) for a $22.00 debit. The trade has a 57 day life and would provide 4.59% downside protection and a 4.55% assigned return rate for a 29.00% annualized return rate (for comparison purposes only). Weyerhaeuser has a current annual dividend yield of 0.51%. [FBB-Seven Summits Research]