Select Sector SPDR-Financial (XLF) 11/16/09 PriceWatch Alert At $13.10 Break Even

Posted: Monday, November 16, 2009 8:22 AM EDT
By: Market Intelligence Center Staff

Select Sector SPDR-Financial (PCX: XLF) ended the last trading session at $14.66. 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 14.43 and resistance in the 14.89 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 $13.10 area. That is also the break even stock price for this trade. This covered call has a 124 day duration, provides 10.64% downside protection and a 6.87% assigned return rate for a 20.22% 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 XLF Jan '11 8 Call (VKP AH) and selling the Mar '10 14 call (XJZ CN) for a $5.29 debit. The trade has a 124 day life and would provide 9.35% downside protection and a 13.42% assigned return rate for a 40.00% annualized return rate (for comparison purposes only). [ABR-Seven Summits Research]