Select Sector SPDR-Industrial (XLI) PriceWatch Alert Technicals Showing Bearish

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

Select Sector SPDR-Industrial (PCX: XLI) closed yesterday at $21.36. So far XLI has hit a 52-week low of $15.14 and 52-week high of $36.16. XLI has been showing support around 20.87 and resistance in the 22.25 range. Technical indicators are Bearish. XLI appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Dec '09 21 covered call (XDL LU) for a net debit in the $19.36 area. That is also the break even stock price for this trade. This covered call has a 166 day duration, provides 9.36% downside protection and an 8.47% assigned return rate for an 18.63% 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 XLI Jan '11 13 Call (VS AM) and selling the Dec '09 21 call (XDL LU) for a $6.80 debit. The trade has a 166 day life and would provide 7.30% downside protection and a 17.65% assigned return rate for a 39.00% 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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