Semiconductor HOLDRS (SMH) 11/9/09 PriceWatch Alert Support Down To $24.07

Posted: Monday, November 09, 2009 8:22 AM EDT
By: Market Intelligence Center Staff

Semiconductor HOLDRS (AMEX: SMH) ended the last trading session at $24.51. So far SMH has hit a 52-week low of $14.45 and 52-week high of $26.92. SMH has been showing support around 24.07 and resistance in the 25.13 range. Technical indicators are Bearish. SMH appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Feb '10 24 covered call (SMH BP) for a net debit in the $22.64 area. That is also the break even stock price for this trade. This covered call has a 103 day duration, provides 7.63% downside protection and a 6.01% assigned return rate for a 21.29% 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 SMH Jan '11 15 Call (OTO AC) and selling the Feb '10 24 call (SMH BP) for an $8.08 debit. The trade has a 103 day life and would provide 5.83% downside protection and an 11.39% assigned return rate for a 40.00% annualized return rate (for comparison purposes only). [ABR-Seven Summits Research]