UltraShort Financials ProShares (SKF) PriceWatch Alert Up To 18.56% Downside Protection

Posted: Monday, July 06, 2009 8:07 AM EDT
By: Market Intelligence Center Staff

UltraShort Financials ProShares (PCX: SKF) closed yesterday at $44.72. So far SKF has hit a 52-week low of $38.36 and 52-week high of $303.82. SKF has been showing support around 42.17 and resistance in the 46.13 range. Technical indicators are Bearish. SKF appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at an Oct '09 41 covered call (SYJ JO) for a net debit in the $36.42 area. That is also the break even stock price for this trade. This covered call has a 103 day duration, provides 18.56% downside protection and a 12.58% assigned return rate for a 44.56% 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 SKF Jan '11 20 Call (ZKF AZ) and selling the Oct '09 41 call (SYJ JO) for a $19.20 debit. The trade has a 103 day life and would provide 12.34% downside protection and a 9.38% assigned return rate for a 33.00% 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]