Select Sector SPDR-Financial (XLF) 11/11/09 PriceWatch Alert Support At Around $14.52

Posted: Wednesday, November 11, 2009 8:04 AM EDT
By: Market Intelligence Center Staff

Select Sector SPDR-Financial (PCX: XLF) closed yesterday at $14.77. So far XLF has hit a 52-week low of $5.88 and 52-week high of $15.76. XLF has been showing support around 14.52 and resistance in the 15.00 range. Technical indicators are Bullish. XLF appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Mar '10 14 covered call (XJZ CN) for a net debit in the $13.14 area. That is also the break even stock price for this trade. This covered call has a 129 day duration, provides 11.04% downside protection and a 6.54% assigned return rate for an 18.52% 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 XLF Jan '11 8 Call (VKP AH) and selling the Mar '10 14 call (XJZ CN) for a $5.32 debit. The trade has a 129 day life and would provide 9.82% downside protection and a 12.78% assigned return rate for a 36.00% annualized return rate (for comparison purposes only). [WBA-Seven Summits Research]