Select Sector SPDR-Technology (XLK) PriceWatch Alert Down To $16.13 Break Even

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

Select Sector SPDR-Technology (PCX: XLK) closed yesterday at $17.83. So far XLK has hit a 52-week low of $12.94 and 52-week high of $23.83. XLK has been showing support around 17.64 and resistance in the 18.22 range. Technical indicators are Bullish. XLK appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Dec '09 17 covered call (XLK LQ) for a net debit in the $16.13 area. That is also the break even stock price for this trade. This covered call has a 166 day duration, provides 9.53% downside protection and a 5.39% assigned return rate for an 11.86% 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 XLK Jan '11 11 Call (VQP AK) and selling the Dec '09 17 call (XLK LQ) for a $5.50 debit. The trade has a 166 day life and would provide 7.46% downside protection and a 9.09% assigned return rate for a 20.00% 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]