KBW Regional Banking ETF (KRE) 7/30/10 PriceWatch Alert With $22.08 Break Even
Posted: Friday, July 30, 2010 8:07 AM EDT
By: Market Intelligence Center Staff
KBW Regional Banking ETF (PACF: KRE) closed yesterday at $23.88. So far KRE has hit a 52-week low of $19.45 and 52-week high of $29.79. KRE has been showing support around 23.17 and resistance in the 24.69 range. Technical indicators are Bearish. KRE appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Dec '10 24 covered call for a net debit in the $22.08 area. That is also the break even stock price for this trade. This covered call has a 141 day duration, provides 7.54% downside protection and an 8.70% assigned return rate for a 22.51% 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 KRE Jan '12 13 Call and selling the Dec '10 24 call for a $10.05 debit. The trade has a 141 day life and would provide 3.48% downside protection and a 9.45% assigned return rate for a 24.00% annualized return rate (for comparison purposes only). [FBB-Seven Summits Research]
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