iShares Dow Jones U.S. Real Estate Index Fund (IYR) 11/20/09 PriceWatch Alert Targets 5.62% Downside Protection

Posted: Friday, November 20, 2009 8:27 AM EDT
By: Market Intelligence Center Staff

iShares Dow Jones U.S. Real Estate Index Fund (PCX: IYR) closed yesterday at $43.38. So far IYR has hit a 52-week low of $20.98 and 52-week high of $46.46. IYR has been showing support around 42.73 and resistance in the 44.21 range. Technical indicators are Bullish. IYR appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Jan '10 43 covered call (BJN AQ) for a net debit in the $40.94 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 5.62% downside protection and a 5.03% assigned return rate for a 32.22% 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 IYR Jan '11 28 Call (ZVR AB) and selling the Jan '10 43 call (BJN AQ) for a $13.36 debit. The trade has a 57 day life and would provide 4.66% downside protection and a 12.28% assigned return rate for a 79.00% annualized return rate (for comparison purposes only). [FBB-Seven Summits Research]