iShares Lehman 20+ Year Treasury Bond Fund (TLT) PriceWatch Alert Up To 6.91% Return

Posted on Friday, September 05, 2008 8:07 AM

iShares Lehman 20+ Year Treasury Bond Fund (PCX: TLT) closed yesterday at $95.53. So far TLT has hit a 52-week low of $87.10 and 52-week high of $98.16. TLT has been showing support around 94.55 and resistance in the 96.05 range. Technical indicators are Bullish. TLT appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Dec '08 95 covered call (ILT LQ) for a net debit in the $93.13 area. That is also the break even stock price for this trade. This covered call has a 106 day duration, provides 2.51% downside protection and a 2.01% assigned return rate for a 6.91% 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 TLT Jan '10 85 Call (YLI AG) and selling the Dec '08 95 call (ILT LQ) for an $8.50 debit. The trade has a 106 day life and would provide 2.12% downside protection and a 17.65% assigned return rate for a 61.00% annualized return rate (for comparison purposes only). [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]