10.28% Downside Protection that was owned by Potential China Life Insurance (LFC) Trade
On Monday, trading session was closed at $49.59 by China Life Insurance (NYSE:LFC). Last year, the stock has reached a 52-week high of $70.71 and 52-week low of $47.16. China Life Insurance (LFC) stock has showed resistance in the $50.30 range and support around $49.00. Bearish and S&P provides China Life Insurance (LFC) a positive four STARS (out of 5) purchase rating and it is technical indicators for the stock.
In a hedged play on China Life Insurance (LFC), have to look at the Jan ’12 $47.50 which closed call for a net debit in the $44.49 area. This thing is also balance with stock price for this trade. This closed call has duration of 186 days, an assigned return rate of 6.77% for an annualized return rate of 13.28% (for comparison purposes only) and gives 10.28% downside protection.
This strategy could be used with looking at going long the China Life Insurance (LFC) Jan ’13 $35.00 call and sell the Jan ’12 $47.50 call for a total debt of $11.25. This trade had a lifespan of 186 days and an assigned return rate of 11.11% for an annualized return rate of 22% (for comparison purposes only) and would give 6.74% downside protection. China Life Insurance (LFC) had a current annual dividend yield of 1.59%.