Knight Trading Group (NITE) In Tight Support/Resistance Range With Bearish Technicals

Posted: Wednesday, November 04, 2009 9:13 AM EDT
By: Market Intelligence Center Staff

Knight Trading Group (NasdaqNM: NITE) closed yesterday at $16.01. So far the stock has hit a 52-week low of $12.71 and 52-week high of $23.11. Knight Trading Group stock has been showing support around 15.55 and resistance in the 16.61 range. Technical indicators for the stock are Bearish and S&P gives NITE a neutral 3 STAR (out of 5) hold rating. NITE appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 15 covered call (QTN DC) for a net debit in the $13.61 area. That is also the break even stock price for this trade. This covered call has a 164 day duration, provides 14.99% downside protection and a 10.21% assigned return rate for a 22.73% 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 NITE Jan '11 7.50 Call (OTI AU) and selling the Apr '10 15 call (QTN DC) for a $6.65 debit. The trade has a 164 day life and would provide 11.62% downside protection and a 12.78% assigned return rate for a 28.00% annualized return rate (for comparison purposes only). Knight Trading Group does not pay dividends at this time. [WBA-Seven Summits Research]