Select Sector SPDR-Financial (XLF) 11/18/09 PriceWatch Alert Down To $12.85 Break Even

Posted: Wednesday, November 18, 2009 8:03 AM EDT
By: Market Intelligence Center Staff

Select Sector SPDR-Financial (PCX: XLF) closed yesterday at $14.86. 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 14.67 and resistance in the 14.99 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 $12.85 area. That is also the break even stock price for this trade. This covered call has a 213 day duration, provides 13.53% downside protection and an 8.95% assigned return rate for a 15.34% 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 10 Call (VKP AB) and selling the Jun '10 14 call (XJZ FN) for a $3.29 debit. The trade has a 213 day life and would provide 10.57% downside protection and a 21.58% assigned return rate for a 37.00% annualized return rate (for comparison purposes only). [WBA-Seven Summits Research]