D R Horton (DHI) 10/20/09 PriceWatch Alert Down To $9.80 Break Even

Posted: Tuesday, October 20, 2009 8:14 AM EDT

D R Horton (NYSE: DHI) closed yesterday at $12.25. So far the stock has hit a 52-week low of $3.79 and 52-week high of $13.90. D R Horton stock has been showing support around 11.88 and resistance in the 12.60 range. Technical indicators for the stock are Bullish and S&P gives DHI a positive 4 STAR (out of 5) buy rating. DHI appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a May '10 11 covered call (DHI EK) for a net debit in the $9.80 area. That is also the break even stock price for this trade. This covered call has a 214 day duration, provides 20.00% downside protection and a 12.24% assigned return rate for a 20.88% 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 DHI Jan '11 5 Call (VEI AA) and selling the May '10 11 call (DHI EK) for a $5.10 debit. The trade has a 214 day life and would provide 17.55% downside protection and a 17.65% assigned return rate for a 30.00% annualized return rate (for comparison purposes only). D R Horton has a current annual dividend yield of 1.21%. [ATU-Seven Summits Research]

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