KB Home (KBH) PriceWatch Alert for October 13, 2009

Posted: Tuesday, October 13, 2009 8:20 AM EDT
By: Market Intelligence Center Staff

KB Home (NYSE: KBH) closed yesterday at $15.17. So far the stock has hit a 52-week low of $6.90 and 52-week high of $20.70. KB Home stock has been showing support around 14.56 and resistance in the 16.24 range. Technical indicators for the stock are Bearish and S&P gives KBH a neutral 3 STAR (out of 5) hold rating. KBH appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 12.50 covered call (KBH DV) for a net debit in the $11.27 area. That is also the break even stock price for this trade. This covered call has an 186 day duration, provides 25.71% downside protection and a 10.91% assigned return rate for a 21.42% 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 KBH Jan '11 5 Call (OHK AA) and selling the Apr '10 12.50 call (KBH DV) for a $6.80 debit. The trade has an 186 day life and would provide 22.21% downside protection and a 10.29% assigned return rate for a 20.00% annualized return rate (for comparison purposes only). KB Home has a current annual dividend yield of 1.56%. [ATU-Seven Summits Research]