SPDR S&P Retail ETF (XRT) 11/25/09 PriceWatch Alert At $32.95 Break Even

Posted: Wednesday, November 25, 2009 8:38 AM EDT
By: Market Intelligence Center Staff

SPDR S&P Retail ETF (PCX: XRT) closed yesterday at $34.88. So far XRT has hit a 52-week low of $16.47 and 52-week high of $37.03. XRT has been showing support around 34.50 and resistance in the 35.48 range. Technical indicators are Bullish. XRT appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Jan '10 34 covered call (XRT AH) for a net debit in the $32.95 area. That is also the break even stock price for this trade. This covered call has a 52 day duration, provides 5.53% downside protection and a 3.19% assigned return rate for a 22.37% 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 XRT Jan '11 20 Call (ZWS AT) and selling the Jan '10 34 call (XRT AH) for a $13.27 debit. The trade has a 52 day life and would provide 4.62% downside protection and a 5.50% assigned return rate for a 39.00% annualized return rate (for comparison purposes only). [WBA-Seven Summits Research]