D R Horton (DHI) PriceWatch Alert for November 5, 2009

Posted: Thursday, November 05, 2009 8:29 AM EDT
By: Market Intelligence Center Staff

D R Horton (NYSE: DHI) closed yesterday at $11.57. 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 10.93 and resistance in the 12.21 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 $8.92 area. That is also the break even stock price for this trade. This covered call has a 198 day duration, provides 22.90% downside protection and a 12.11% assigned return rate for a 22.32% 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 $4.45 debit. The trade has a 198 day life and would provide 18.32% downside protection and a 12.36% assigned return rate for a 23.00% annualized return rate (for comparison purposes only). D R Horton has a current annual dividend yield of 1.37%. [THA-Seven Summits Research]