D R Horton (DHI) 10/21/09 PriceWatch Alert Bullish Price Movement

Posted: Wednesday, October 21, 2009 8:38 AM EDT
By: Market Intelligence Center Staff

D R Horton (NYSE: DHI) closed yesterday at $12.09. 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 11.69 and resistance in the 12.51 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 $9.74 area. That is also the break even stock price for this trade. This covered call has a 213 day duration, provides 19.44% downside protection and a 12.94% assigned return rate for a 22.17% 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 $5.15 debit. The trade has a 213 day life and would provide 16.05% downside protection and a 16.50% assigned return rate for a 28.00% annualized return rate (for comparison purposes only). D R Horton has a current annual dividend yield of 1.23%. [WBA-Seven Summits Research]