D R Horton (DHI) 10/30/09 PriceWatch Alert Could Hit 22.57% Return

Posted: Friday, October 30, 2009 8:11 AM EDT

D R Horton (NYSE: DHI) closed yesterday at $11.38. 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 11.09 and resistance in the 11.89 range. Technical indicators for the stock are Bearish 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 10 covered call (DHI EB) for a net debit in the $8.88 area. That is also the break even stock price for this trade. This covered call has a 204 day duration, provides 21.97% downside protection and a 12.61% assigned return rate for a 22.57% 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 10 call (DHI EB) for a $4.30 debit. The trade has a 204 day life and would provide 18.28% downside protection and a 16.28% assigned return rate for a 29.00% annualized return rate (for comparison purposes only). D R Horton has a current annual dividend yield of 1.27%. [FBB-Seven Summits Research]

Click Symbol For More News On: (DHI)