Pulte Homes Inc. (PHM) 9/21/09 PriceWatch Alert With 23.21% Downside Protection

Posted: Monday, September 21, 2009 8:03 AM EDT
By: Market Intelligence Center Staff

Pulte Homes Inc. (NYSE: PHM) ended the last trading session at $12.71. 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 12.36 and resistance in the 13.36 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 $9.76 area. That is also the break even stock price for this trade. This covered call has a 208 day duration, provides 23.21% downside protection and a 12.70% assigned return rate for a 22.29% 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 2.50 Call (OPN AR) and selling the Apr '10 11 call (PHM DK) for a $7.50 debit. The trade has a 208 day life and would provide 21.32% downside protection and a 13.33% assigned return rate for a 23.00% annualized return rate (for comparison purposes only). Pulte Homes does not pay dividends at this time. [ABR-Seven Summits Research] For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo