Pulte Homes Inc. (PHM) 9/30/09 PriceWatch Alert Bearish Price Movement

Posted: Wednesday, September 30, 2009 8:30 AM EDT
By: Market Intelligence Center Staff

Pulte Homes Inc. (NYSE: PHM) closed yesterday at $11.37. So far the stock has hit a 52-week low of $6.49 and 52-week high of $15.38. Pulte Homes stock has been showing support around 11.10 and resistance in the 11.70 range. Technical indicators for the stock are Bearish 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 10 covered call (PHM DB) for a net debit in the $8.92 area. That is also the break even stock price for this trade. This covered call has a 199 day duration, provides 21.55% downside protection and a 12.11% assigned return rate for a 22.21% 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 10 call (PHM DB) for a $6.75 debit. The trade has a 199 day life and would provide 18.65% downside protection and an 11.11% assigned return rate for a 20.00% annualized return rate (for comparison purposes only). Pulte Homes does not pay dividends at this time. [WBA-Seven Summits Research]