Urban Outfitters (URBN) 11/3/09 PriceWatch Alert Targets 29.63% Return

Posted: Tuesday, November 03, 2009 8:15 AM EDT

Urban Outfitters (NasdaqNM: URBN) closed yesterday at $32.20. So far the stock has hit a 52-week low of $12.33 and 52-week high of $33.99. Urban Outfitters stock has been showing support around 30.51 and resistance in the 33.15 range. Technical indicators for the stock are Bullish and S&P gives URBN a positive 4 STAR (out of 5) buy rating. URBN appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Jan '10 30 covered call (URQ AF) for a net debit in the $28.30 area. That is also the break even stock price for this trade. This covered call has a 74 day duration, provides 12.11% downside protection and a 6.01% assigned return rate for a 29.63% 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 URBN Jan '11 5 Call (ZLL AA) and selling the Jan '10 30 call (URQ AF) for a $23.75 debit. The trade has a 74 day life and would provide 10.71% downside protection and a 5.26% assigned return rate for a 26.00% annualized return rate (for comparison purposes only). Urban Outfitters does not pay dividends at this time. [ATU-Seven Summits Research]

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