PowerShares DB Commodity Index Tracking Fund (DBC) PriceWatch Alert Could Hit 22.62% Return

Posted: Monday, July 06, 2009 8:07 AM EDT

PowerShares DB Commodity Index Tracking Fund (PCX: DBC) closed yesterday at $22.03. So far DBC has hit a 52-week low of $17.94 and 52-week high of $46.63. DBC has been showing support around 21.83 and resistance in the 22.21 range. Technical indicators are Bearish. DBC appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at an Oct '09 22 covered call (DOB JV) for a net debit in the $20.68 area. That is also the break even stock price for this trade. This covered call has a 103 day duration, provides 6.13% downside protection and a 6.38% assigned return rate for a 22.62% 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 DBC Jan '11 10 Call (VCZ AJ) and selling the Oct '09 22 call (DOB JV) for a $10.85 debit. The trade has a 103 day life and would provide 5.36% downside protection and a 10.60% assigned return rate for a 38.00% 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]

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