United States Oil Fund, LP (USO) 3/19/10 PriceWatch Alert Targets 8.02% Downside Protection
Posted: Friday, March 19, 2010 8:25 AM EDT
By: Market Intelligence Center Staff
United States Oil Fund, LP (PACF: USO) closed yesterday at $39.92. So far USO has hit a 52-week low of $26.28 and 52-week high of $41.92. USO has been showing support around 39.49 and resistance in the 40.45 range. Technical indicators are Bullish. USO appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Jul '10 39 covered call for a net debit in the $36.72 area. That is also the break even stock price for this trade. This covered call has a 120 day duration, provides 8.02% downside protection and a 6.21% assigned return rate for an 18.89% 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 USO Jan '11 30 Call and selling the Jul '10 39 call for a $7.85 debit. The trade has a 120 day life and would provide 5.19% downside protection and a 14.65% assigned return rate for a 45.00% annualized return rate (for comparison purposes only). [FBB-Seven Summits Research]
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