Urban Outfitters (URBN) 11/19/09 PriceWatch Alert Could Hit 29.15% Return

Posted: Thursday, November 19, 2009 8:33 AM EDT
By: Market Intelligence Center Staff

Urban Outfitters (NasdaqNM: URBN) closed yesterday at $33.08. So far the stock has hit a 52-week low of $12.33 and 52-week high of $34.67. Urban Outfitters stock has been showing support around 32.49 and resistance in the 34.09 range. Technical indicators for the stock are Bullish and S&P gives URBN a positive 4 STAR (out of 5) buy rating. URBN appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Mar '10 32 covered call (HXW CF) for a net debit in the $29.18 area. That is also the break even stock price for this trade. This covered call has a 121 day duration, provides 11.79% downside protection and a 9.66% assigned return rate for a 29.15% 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 URBN Jan '11 17.50 Call (ZLL AW) and selling the Mar '10 32 call (HXW CF) for a $13.20 debit. The trade has a 121 day life and would provide 7.19% downside protection and a 9.85% assigned return rate for a 30.00% annualized return rate (for comparison purposes only). Urban Outfitters does not pay dividends at this time. [THA-Seven Summits Research]