Regional Bank HOLDRS (RKH) 11/6/09 PriceWatch Alert Technicals Showing Bearish

Posted: Friday, November 06, 2009 8:30 AM EDT

Regional Bank HOLDRS (AMEX: RKH) closed yesterday at $77.74. So far RKH has hit a 52-week low of $29.98 and 52-week high of $92.43. RKH has been showing support around 74.45 and resistance in the 79.43 range. Technical indicators are Bearish. RKH appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Jan '10 75 covered call (RKH AU) for a net debit in the $71.44 area. That is also the break even stock price for this trade. This covered call has a 71 day duration, provides 8.10% downside protection and a 4.98% assigned return rate for a 25.62% 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 RKH Jan '11 25 Call (OSF AE) and selling the Jan '10 75 call (RKH AU) for a $46.85 debit. The trade has a 71 day life and would provide 7.58% downside protection and a 6.72% assigned return rate for a 35.00% annualized return rate (for comparison purposes only). [FBB-Seven Summits Research]

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