Urban Outfitters (URBN) PriceWatch Alert Up To 14.05% Downside Protection

Posted on Tuesday, July 22, 2008 8:07 AM

Urban Outfitters (NasdaqNM: URBN) closed yesterday at $31.32. So far the stock has hit a 52-week low of $19.20 and 52-week high of $35.37. Urban Outfitters stock has been showing support around 30.01 and resistance in the 32.85 range. Technical indicators for the stock are Bearish and S&P gives URBN a positive 4 STAR (out of 5) buy rating. URBN appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Mar '09 32.50 covered call (URQ CZ) for a net debit in the $26.92 area. That is also the break even stock price for this trade. This covered call has a 242 day duration, provides 14.05% downside protection and a 20.73% assigned return rate for a 31.26% 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 URBN Jan '09 30 Call (URQ AF) and selling the Mar '09 32.50 call (URQ CZ) for a $0.75 debit. The trade has a 242 day life and would provide 1.82% downside protection and a 233.33% assigned return rate for a 352.00% annualized return rate (for comparison purposes only). Urban Outfitters does not pay dividends at this time. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]