Select Sector SPDR-Industrial (XLI) 11/19/09 PriceWatch Alert At $25.88 Break Even

Posted: Thursday, November 19, 2009 8:17 AM EDT
By: Market Intelligence Center Staff

Select Sector SPDR-Industrial (PCX: XLI) closed yesterday at $27.93. So far XLI has hit a 52-week low of $15.14 and 52-week high of $28.17. XLI has been showing support around 27.64 and resistance in the 28.26 range. Technical indicators are Bullish. XLI appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Mar '10 27 covered call (XDL CA) for a net debit in the $25.88 area. That is also the break even stock price for this trade. This covered call has a 121 day duration, provides 7.34% downside protection and a 4.33% assigned return rate for a 13.05% 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 XLI Jan '11 17 Call (VS AQ) and selling the Mar '10 27 call (XDL CA) for a $9.15 debit. The trade has a 121 day life and would provide 6.37% downside protection and a 9.29% assigned return rate for a 28.00% annualized return rate (for comparison purposes only). [THA-Seven Summits Research]