Retail HOLDRS (RTH) PriceWatch Alert At $88.65 Break Even

Posted on Friday, September 05, 2008 8:07 AM

Retail HOLDRS (AMEX: RTH) closed yesterday at $96.25. So far RTH has hit a 52-week low of $82.71 and 52-week high of $105.10. RTH has been showing support around 94.67 and resistance in the 99.41 range. Technical indicators are Bullish. RTH appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Jan '09 95 covered call (RTH AS) for a net debit in the $88.65 area. That is also the break even stock price for this trade. This covered call has a 134 day duration, provides 7.90% downside protection and a 7.16% assigned return rate for a 19.51% 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 RTH Jan '10 65 Call (LOU AM) and selling the Jan '09 95 call (RTH AS) for a $26.75 debit. The trade has a 134 day life and would provide 4.68% downside protection and a 12.15% assigned return rate for a 33.00% annualized return rate (for comparison purposes only). [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]