Lennar (LEN) 10/16/09 PriceWatch Alert With 29.18% Downside Protection

Posted: Friday, October 16, 2009 8:21 AM EDT

Lennar (NYSE: LEN) closed yesterday at $15.08. So far the stock has hit a 52-week low of $3.42 and 52-week high of $17.66. Lennar stock has been showing support around 14.83 and resistance in the 15.33 range. Technical indicators for the stock are Bullish and S&P gives LEN a very positive 5 STAR (out of 5) strong buy rating. LEN appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a May '10 12 covered call (LEN EL) for a net debit in the $10.68 area. That is also the break even stock price for this trade. This covered call has a 218 day duration, provides 29.18% downside protection and a 12.36% assigned return rate for a 20.69% 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 LEN Jan '11 5 Call (OOW AA) and selling the May '10 12 call (LEN EL) for a $5.95 debit. The trade has a 218 day life and would provide 27.39% downside protection and a 17.65% assigned return rate for a 30.00% annualized return rate (for comparison purposes only). Lennar has a current annual dividend yield of 1.06%. [FBB-Seven Summits Research]

Click Symbol For More News On: (LEN)