Retail HOLDRS (RTH) 11/10/09 PriceWatch Alert Up To 7.80% Return

Posted: Tuesday, November 10, 2009 8:14 AM EDT

Retail HOLDRS (AMEX: RTH) closed yesterday at $94.16. So far RTH has hit a 52-week low of $60.23 and 52-week high of $94.16. RTH has been showing support around 92.28 and resistance in the 95.10 range. Technical indicators are Bullish. RTH appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at an Apr '10 90 covered call (RTH DR) for a net debit in the $87.06 area. That is also the break even stock price for this trade. This covered call has a 158 day duration, provides 7.54% downside protection and a 3.38% assigned return rate for a 7.80% 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 RTH Jan '11 60 Call (ZJS AL) and selling the Apr '10 90 call (RTH DR) for a $27.55 debit. The trade has a 158 day life and would provide 7.02% downside protection and an 8.89% assigned return rate for a 21.00% annualized return rate (for comparison purposes only). [ATU-Seven Summits Research]

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