Select Sector SPDR-Utilities (XLU) PriceWatch Alert Up To 16.97% Return

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

Select Sector SPDR-Utilities (PCX: XLU) closed yesterday at $27.44. So far XLU has hit a 52-week low of $22.48 and 52-week high of $41.20. XLU has been showing support around 26.86 and resistance in the 28.54 range. Technical indicators are Bullish. XLU appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Sep '09 27 covered call (XLU IA) for a net debit in the $26.09 area. That is also the break even stock price for this trade. This covered call has a 75 day duration, provides 4.92% downside protection and a 3.49% assigned return rate for a 16.97% 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 XLU Jan '11 20 Call (ORU AT) and selling the Sep '09 27 call (XLU IA) for a $6.45 debit. The trade has a 75 day life and would provide 3.61% downside protection and an 8.53% assigned return rate for a 41.00% 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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