SPDR Homebuilders ETF (XHB) 11/3/09 PriceWatch Alert Support Down To $13.16

Posted: Tuesday, November 03, 2009 8:43 AM EDT

SPDR Homebuilders ETF (PCX: XHB) closed yesterday at $13.83. So far XHB has hit a 52-week low of $8.00 and 52-week high of $16.75. XHB has been showing support around 13.16 and resistance in the 14.50 range. Technical indicators are Bearish. XHB appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Mar '10 13 covered call (XXJ CM) for a net debit in the $12.06 area. That is also the break even stock price for this trade. This covered call has a 137 day duration, provides 12.80% downside protection and a 7.79% assigned return rate for a 20.77% 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 XHB Jan '11 7.50 Call (XJL AU) and selling the Mar '10 13 call (XXJ CM) for a $4.88 debit. The trade has a 137 day life and would provide 10.48% downside protection and a 12.70% assigned return rate for a 34.00% annualized return rate (for comparison purposes only). [ATU-Seven Summits Research]

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