Oil Service HOLDRS (OIH) 11/20/09 PriceWatch Alert At $110.05 Break Even

Posted: Friday, November 20, 2009 8:17 AM EDT
By: Market Intelligence Center Staff

Oil Service HOLDRS (AMEX: OIH) closed yesterday at $119.80. So far OIH has hit a 52-week low of $60.96 and 52-week high of $132.39. OIH has been showing support around 116.67 and resistance in the 125.27 range. Technical indicators are Bearish. OIH appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Jan '10 115 covered call (OIH AC) for a net debit in the $110.05 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 8.14% downside protection and a 4.50% assigned return rate for a 28.80% 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 OIH Jan '11 75 Call (ZJO AX) and selling the Jan '10 115 call (OIH AC) for a $38.70 debit. The trade has a 57 day life and would provide 5.09% downside protection and a 3.36% assigned return rate for a 22.00% annualized return rate (for comparison purposes only). [FBB-Seven Summits Research]