CurrencyShares Euro Trust (FXE) 11/5/09 PriceWatch Alert Targets 2.29% Downside Protection

Posted: Thursday, November 05, 2009 8:39 AM EDT
By: Market Intelligence Center Staff

CurrencyShares Euro Trust (PCX: FXE) closed yesterday at $148.49. So far FXE has hit a 52-week low of $124.59 and 52-week high of $150.31. FXE has been showing support around 147.26 and resistance in the 149.52 range. Technical indicators are Bullish. FXE appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Jan '10 148 covered call (FXE AR) for a net debit in the $145.09 area. That is also the break even stock price for this trade. This covered call has a 72 day duration, provides 2.29% downside protection and a 2.01% assigned return rate for a 10.17% 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 FXE Jan '11 105 Call (XXF AA) and selling the Jan '10 148 call (FXE AR) for a $40.90 debit. The trade has a 72 day life and would provide 1.74% downside protection and a 5.13% assigned return rate for a 26.00% annualized return rate (for comparison purposes only). [THA-Seven Summits Research]