Pulte Homes Inc. (PHM) 9/17/09 PriceWatch Alert Targets 19.13% Return

Posted: Thursday, September 17, 2009 8:04 AM EDT

Pulte Homes Inc. (NYSE: PHM) closed yesterday at $13.10. So far the stock has hit a 52-week low of $6.49 and 52-week high of $17.32. Pulte Homes stock has been showing support around 12.32 and resistance in the 13.54 range. Technical indicators for the stock are Bullish and S&P gives PHM a positive 4 STAR (out of 5) buy rating. PHM appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 11 covered call (PHM DK) for a net debit in the $9.90 area. That is also the break even stock price for this trade. This covered call has a 212 day duration, provides 24.43% downside protection and an 11.11% assigned return rate for a 19.13% 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 PHM Jan '11 5 Call (OPN AA) and selling the Apr '10 11 call (PHM DK) for a $5.30 debit. The trade has a 212 day life and would provide 21.37% downside protection and a 13.21% assigned return rate for a 23.00% annualized return rate (for comparison purposes only). Pulte Homes does not pay dividends at this time. [THA-Seven Summits Research] For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo

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