Select Sector SPDR-Financial (XLF) 11/6/09 PriceWatch Alert Up To 22.54% Return

Posted: Friday, November 06, 2009 8:31 AM EDT

Select Sector SPDR-Financial (PCX: XLF) closed yesterday at $14.37. So far XLF has hit a 52-week low of $5.88 and 52-week high of $15.76. XLF has been showing support around 13.90 and resistance in the 14.62 range. Technical indicators are Bearish. XLF appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Mar '10 14 covered call (XJZ CN) for a net debit in the $12.93 area. That is also the break even stock price for this trade. This covered call has a 134 day duration, provides 10.02% downside protection and an 8.28% assigned return rate for a 22.54% 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 XLF Jan '11 8 Call (VKP AH) and selling the Mar '10 14 call (XJZ CN) for a $5.16 debit. The trade has a 134 day life and would provide 8.42% downside protection and a 16.28% assigned return rate for a 44.00% annualized return rate (for comparison purposes only). [FBB-Seven Summits Research]

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