Ryland Group (RYL) 9/25/09 PriceWatch Alert With 26.25% Downside Protection

Posted: Friday, September 25, 2009 8:27 AM EDT
By: Market Intelligence Center Staff

Ryland Group (NYSE: RYL) closed yesterday at $22.48. So far the stock has hit a 52-week low of $9.95 and 52-week high of $27.98. Ryland Group stock has been showing support around 21.53 and resistance in the 23.85 range. Technical indicators for the stock are Bullish and S&P gives RYL a weak 2 STAR (out of 5) sell rating. RYL appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 17.50 covered call (RGV AW) for a net debit in the $16.58 area. That is also the break even stock price for this trade. This covered call has an 113 day duration, provides 26.25% downside protection and a 5.55% assigned return rate for a 17.92% 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 RYL Jan '11 7.50 Call (ONG AU) and selling the Jan '10 17.50 call (RGV AW) for a $9.70 debit. The trade has an 113 day life and would provide 23.49% downside protection and a 3.09% assigned return rate for a 10.00% annualized return rate (for comparison purposes only). Ryland Group has a current annual dividend yield of 0.51%. [FBB-Seven Summits Research]