Select Sector SPDR-Consumer Staples (XLP) PriceWatch Alert Support At Around $27.75

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

Select Sector SPDR-Consumer Staples (AMEX: XLP) closed yesterday at $28.06. So far XLP has hit a 52-week low of $24.38 and 52-week high of $29.77. XLP has been showing support around 27.75 and resistance in the 28.63 range. Technical indicators are Bullish. XLP appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Dec '08 28 covered call (XLP LB) for a net debit in the $27.01 area. That is also the break even stock price for this trade. This covered call has a 106 day duration, provides 3.74% downside protection and a 3.67% assigned return rate for a 12.62% 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 XLP Jan '10 20 Call (YLV AT) and selling the Dec '08 28 call (XLP LB) for a $7.40 debit. The trade has a 106 day life and would provide 2.35% downside protection and an 8.11% assigned return rate for a 28.00% 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]