D R Horton (DHI) 10/26/09 PriceWatch Alert Shows Bullish Technicals

Posted: Monday, October 26, 2009 8:09 AM EDT

D R Horton (NYSE: DHI) ended the last trading session at $12.42. 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 11.63 and resistance in the 13.39 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 $9.77 area. That is also the break even stock price for this trade. This covered call has a 208 day duration, provides 21.34% downside protection and a 12.59% assigned return rate for a 22.09% 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 $5.05 debit. The trade has a 208 day life and would provide 19.08% downside protection and an 18.81% assigned return rate for a 33.00% annualized return rate (for comparison purposes only). D R Horton has a current annual dividend yield of 1.23%. [ABR-Seven Summits Research]

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