Select Sector SPDR-Utilities (XLU) 11/11/09 PriceWatch Alert Down To $28.12 Break Even

Posted: Wednesday, November 11, 2009 8:45 AM EDT
By: Market Intelligence Center Staff

Select Sector SPDR-Utilities (PCX: XLU) closed yesterday at $29.58. So far XLU has hit a 52-week low of $22.48 and 52-week high of $30.47. XLU has been showing support around 29.21 and resistance in the 29.83 range. Technical indicators are Bullish. XLU appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Mar '10 29 covered call (XLU CC) for a net debit in the $28.12 area. That is also the break even stock price for this trade. This covered call has a 129 day duration, provides 4.94% downside protection and a 3.13% assigned return rate for an 8.85% 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 XLU Jan '11 20 Call (ORU AT) and selling the Mar '10 29 call (XLU CC) for an $8.09 debit. The trade has a 129 day life and would provide 5.04% downside protection and an 11.25% assigned return rate for a 32.00% annualized return rate (for comparison purposes only). [WBA-Seven Summits Research]