CurrencyShares Euro Trust (FXE) PriceWatch Alert Targets 3.20% Downside Protection

Posted: Friday, July 31, 2009 8:07 AM EDT
By: Market Intelligence Center Staff

CurrencyShares Euro Trust (PCX: FXE) closed yesterday at $140.60. So far FXE has hit a 52-week low of $124.04 and 52-week high of $157.33. FXE has been showing support around 139.81 and resistance in the 141.21 range. Technical indicators are Bullish. FXE appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Dec '09 140 covered call (FXE LJ) for a net debit in the $136.10 area. That is also the break even stock price for this trade. This covered call has a 141 day duration, provides 3.20% downside protection and a 2.87% assigned return rate for a 7.42% 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 FXE Jan '11 110 Call (XXF AF) and selling the Dec '09 140 call (FXE LJ) for a $27.85 debit. The trade has a 141 day life and would provide 1.96% downside protection and a 7.72% 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]