iShares MSCI Emerging Markets Index (EEM) 11/9/09 PriceWatch Alert With 6.51% Downside Protection

Posted: Monday, November 09, 2009 8:05 AM EDT
By: Market Intelligence Center Staff

iShares MSCI Emerging Markets Index (PCX: EEM) ended the last trading session at $39.65. So far EEM has hit a 52-week low of $18.22 and 52-week high of $42.00. EEM has been showing support around 38.92 and resistance in the 40.24 range. Technical indicators are Bullish. EEM appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Jan '10 39 covered call (EEM AM) for a net debit in the $37.07 area. That is also the break even stock price for this trade. This covered call has a 68 day duration, provides 6.51% downside protection and a 5.21% assigned return rate for a 27.95% 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 EEM Jan '11 21 Call (ZYX AU) and selling the Jan '10 39 call (EEM AM) for a $16.27 debit. The trade has a 68 day life and would provide 6.00% downside protection and a 10.63% assigned return rate for a 57.00% annualized return rate (for comparison purposes only). [ABR-Seven Summits Research]