Union Pacific (UNP) Traded Lower Yesterday But Still Showing Bullish Technicals

Union Pacific (NYSE: UNP) closed yesterday at $59.15. So far the stock has hit a 52-week low of $33.28 and 52-week high of $69.60. Union Pacific stock has been showing support around 57.40 and resistance in the 62.06 range. Technical indicators for the stock are Bullish and S&P gives UNP a neutral 3 STAR (out of 5) hold rating. UNP appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Jan '10 55 covered call (UNP AK) for a net debit in the $52.85 area. That is also the break even stock price for this trade. This covered call has a 72 day duration, provides 10.65% downside protection and a 4.07% assigned return rate for a 20.62% 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 UNP Jan '11 30 Call (VUJ AF) and selling the Jan '10 55 call (UNP AK) for a $24.15 debit. The trade has a 72 day life and would provide 8.45% downside protection and a 3.52% assigned return rate for an 18.00% annualized return rate (for comparison purposes only). Union Pacific has a current annual dividend yield of 1.96%.

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