UltraShort S&P500 ProShares (SDS) PriceWatch Alert Up To 47.41% Return

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

UltraShort S&P500 ProShares (PCX: SDS) closed yesterday at $57.84. So far SDS has hit a 52-week low of $51.55 and 52-week high of $133.20. SDS has been showing support around 55.72 and resistance in the 58.96 range. Technical indicators are Bearish. SDS appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Sep '09 57 covered call (SDS IE) for a net debit in the $51.94 area. That is also the break even stock price for this trade. This covered call has a 75 day duration, provides 10.20% downside protection and a 9.74% assigned return rate for a 47.41% 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 SDS Jan '11 25 Call (ZDH AY) and selling the Sep '09 57 call (SDS IE) for a $27.30 debit. The trade has a 75 day life and would provide 9.58% downside protection and a 17.22% assigned return rate for an 84.00% 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]