Select Sector SPDR-Consumer Discretionary (XLY) PriceWatch Alert for July 6, 2009

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

Select Sector SPDR-Consumer Discretionary (PCX: XLY) closed yesterday at $22.29. So far XLY has hit a 52-week low of $15.85 and 52-week high of $34.50. XLY has been showing support around 21.66 and resistance in the 23.54 range. Technical indicators are Bearish. XLY appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Sep '09 21 covered call (XLY IU) for a net debit in the $20.14 area. That is also the break even stock price for this trade. This covered call has a 75 day duration, provides 9.65% downside protection and a 4.27% assigned return rate for a 20.78% 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 XLY Jan '11 10 Call (ZMP AJ) and selling the Sep '09 21 call (XLY IU) for a $10.45 debit. The trade has a 75 day life and would provide 8.25% downside protection and a 5.26% assigned return rate for a 26.00% 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]