Regional Bank HOLDRS (RKH) PriceWatch Alert Shows Bearish Technicals

Posted: Monday, July 06, 2009 8:07 AM EDT
By: Market Intelligence Center Staff

Regional Bank HOLDRS (AMEX: RKH) closed yesterday at $63.45. So far RKH has hit a 52-week low of $29.98 and 52-week high of $139.12. RKH has been showing support around 62.36 and resistance in the 65.54 range. Technical indicators are Bearish. RKH appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Nov '09 60 covered call (RKH KW) for a net debit in the $54.25 area. That is also the break even stock price for this trade. This covered call has a 138 day duration, provides 14.50% downside protection and a 10.60% assigned return rate for a 28.03% 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 RKH Jan '11 20 Call (OSF AU) and selling the Nov '09 60 call (RKH KW) for a $35.60 debit. The trade has a 138 day life and would provide 12.37% downside protection and a 12.36% 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]