Lennar (LEN) 10/23/09 PriceWatch Alert Up To 18.87% Return

Posted: Friday, October 23, 2009 8:07 AM EDT

Lennar (NYSE: LEN) closed yesterday at $14.72. 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 12.85 and resistance in the 15.83 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 $10.82 area. That is also the break even stock price for this trade. This covered call has a 211 day duration, provides 26.49% downside protection and a 10.91% assigned return rate for an 18.87% 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 $6.20 debit. The trade has a 211 day life and would provide 23.91% downside protection and a 12.90% assigned return rate for a 22.00% annualized return rate (for comparison purposes only). Lennar has a current annual dividend yield of 1.14%. [FBB-Seven Summits Research]

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