Select Sector SPDR-Financial (XLF) PriceWatch Alert for November 17, 2009

Posted: Tuesday, November 17, 2009 8:11 AM EDT
By: Market Intelligence Center Staff

Select Sector SPDR-Financial (PCX: XLF) closed yesterday at $14.82. 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 14.59 and resistance in the 15.13 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 Jun '10 14 covered call (XJZ FN) for a net debit in the $12.81 area. That is also the break even stock price for this trade. This covered call has a 214 day duration, provides 13.56% downside protection and a 9.29% assigned return rate for a 15.84% 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 9 Call (VKP AI) and selling the Jun '10 14 call (XJZ FN) for a $4.09 debit. The trade has a 214 day life and would provide 11.67% downside protection and a 22.25% assigned return rate for a 38.00% annualized return rate (for comparison purposes only). [ATU-Seven Summits Research]