CurrencyShares Euro Trust (FXE) 10/23/09 PriceWatch Alert With 2.13% Downside Protection

Posted: Friday, October 23, 2009 8:09 AM EDT
By: Market Intelligence Center Staff

CurrencyShares Euro Trust (PCX: FXE) closed yesterday at $150.14. So far FXE has hit a 52-week low of $124.04 and 52-week high of $150.28. FXE has been showing support around 149.22 and resistance in the 150.68 range. Technical indicators are Bullish. FXE appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Jan '10 150 covered call (FXE AT) for a net debit in the $146.94 area. That is also the break even stock price for this trade. This covered call has an 85 day duration, provides 2.13% downside protection and a 2.08% assigned return rate for an 8.94% 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 FXE Jan '11 120 Call (XXF AP) and selling the Jan '10 150 call (FXE AT) for a $28.00 debit. The trade has an 85 day life and would provide 1.43% downside protection and a 7.14% assigned return rate for a 31.00% annualized return rate (for comparison purposes only). [FBB-Seven Summits Research]