Select Sector SPDR-Energy (XLE) 11/10/09 PriceWatch Alert Up To 4.33% Downside Protection
Posted: Tuesday, November 10, 2009 8:35 AM EDT
By: Market Intelligence Center Staff
Select Sector SPDR-Energy (PCX: XLE) closed yesterday at $58.17. So far XLE has hit a 52-week low of $37.40 and 52-week high of $60.56. XLE has been showing support around 57.50 and resistance in the 58.58 range. Technical indicators are Bullish. XLE appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Dec '09 58 covered call (GQQ LF) for a net debit in the $55.65 area. That is also the break even stock price for this trade. This covered call has a 51 day duration, provides 4.33% downside protection and a 4.22% assigned return rate for a 30.22% 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 XLE Jan '11 30 Call (ORJ AD) and selling the Dec '09 58 call (GQQ LF) for a $25.93 debit. The trade has a 51 day life and would provide 3.85% downside protection and a 7.98% assigned return rate for a 57.00% annualized return rate (for comparison purposes only). [ATU-Seven Summits Research]
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