Walgreen Co. (NYSE:WAG) opened at $44.28. So far today the stock has hit a low of $44.24 and a high of $45.05. As of 1:00 this afternoon, WAG is trading at 44.10, down 0.04 (-0.1%), well off its morning highs.
After hitting a one year high of 51.60 in September, the stock dropped sharply and has since seen resistance around 47. Tensions over the deal between CVS (NYSE:CVS) and Caremark (NYSE:CMX) wreaked havoc on drug store stocks yesterday, including a big dip in WAG stock yesterday afternoon. Most of these stocks bounced back earlier today but are now sliding with the rest of the market, with the CVS/CMX vote scheduled for tomorrow. The technical indicators for WAG have been bearish and steady, while S&P gives the stock positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $37.50 range. WAG hasn't been below 39.50 at all in the past year, and has shown support around 40. This trade could be risky depending on how the CVS-CMX deal turns out, but the strong support for WAG around 40 could protect this position.
Brent Archer is an options analyst and writer at Investors Observer. (Free Subscription)
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about.
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