Pulte Homes Inc. (PHM) 2/9/10 PriceWatch Alert Targets 23.36% Downside Protection

Posted: Tuesday, February 09, 2010 8:11 AM EDT
By: Market Intelligence Center Staff

Pulte Homes Inc. (NYSE: PHM) closed yesterday at $11.13. So far the stock has hit a 52-week low of $7.71 and 52-week high of $13.59. Pulte Homes stock has been showing support around 10.34 and resistance in the 11.86 range. Technical indicators for the stock are Bullish and S&P gives PHM a positive 4 STAR (out of 5) buy rating. PHM appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '11 10 covered call for a net debit in the $8.53 area. That is also the break even stock price for this trade. This covered call has a 347 day duration, provides 23.36% downside protection and a 17.23% assigned return rate for an 18.13% 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 PHM Jan '11 7.50 Call and selling the Jan '11 10 call for a $1.90 debit. The trade has a 347 day life and would provide 15.54% downside protection and a 31.58% assigned return rate for a 33.00% annualized return rate (for comparison purposes only). Pulte Homes does not pay dividends at this time. [ATU-Seven Summits Research]