Oil Service HOLDRS (OIH) PriceWatch Alert Shows Bearish Technicals

Posted: Monday, July 06, 2009 8:07 AM EDT

Oil Service HOLDRS (AMEX: OIH) closed yesterday at $92.62. So far OIH has hit a 52-week low of $60.96 and 52-week high of $217.20. OIH has been showing support around 90.22 and resistance in the 96.42 range. Technical indicators are Bearish. OIH appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at an Oct '09 90 covered call (OIH JR) for a net debit in the $82.52 area. That is also the break even stock price for this trade. This covered call has a 103 day duration, provides 10.90% downside protection and a 9.06% assigned return rate for a 32.12% 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 OIH Jan '11 40 Call (ZJO AH) and selling the Oct '09 90 call (OIH JR) for a $44.05 debit. The trade has a 103 day life and would provide 9.25% downside protection and a 13.51% assigned return rate for a 48.00% 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]

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