iShares FTSE/Xinhua China 25 Index Fund (FXI) 11/17/09 PriceWatch Alert With 5.18% Downside Protection

Posted: Tuesday, November 17, 2009 8:45 AM EDT
By: Market Intelligence Center Staff

iShares FTSE/Xinhua China 25 Index Fund (PCX: FXI) closed yesterday at $46.35. So far FXI has hit a 52-week low of $20.90 and 52-week high of $46.66. FXI has been showing support around 45.62 and resistance in the 47.02 range. Technical indicators are Bullish. FXI appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Jan '10 46 covered call (FXI AT) for a net debit in the $43.95 area. That is also the break even stock price for this trade. This covered call has a 60 day duration, provides 5.18% downside protection and a 4.66% assigned return rate for a 28.38% 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 FXI Jan '11 26 Call (VHF AZ) and selling the Jan '10 46 call (FXI AT) for an $18.20 debit. The trade has a 60 day life and would provide 4.64% downside protection and a 9.89% assigned return rate for a 60.00% annualized return rate (for comparison purposes only). [ATU-Seven Summits Research]