Lennar (LEN) 10/20/09 PriceWatch Alert At $10.59 Break Even

Posted: Tuesday, October 20, 2009 8:16 AM EDT
By: Market Intelligence Center Staff

Lennar (NYSE: LEN) closed yesterday at $14.39. 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 13.95 and resistance in the 15.17 range. Technical indicators for the stock are Neutral 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 $10.59 area. That is also the break even stock price for this trade. This covered call has a 214 day duration, provides 26.41% downside protection and a 13.31% assigned return rate for a 22.71% 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 $6.05 debit. The trade has a 214 day life and would provide 23.21% downside protection and a 15.70% assigned return rate for a 27.00% annualized return rate (for comparison purposes only). Lennar has a current annual dividend yield of 1.06%. [ATU-Seven Summits Research]