United States Natural Gas Fund, LP (UNG) 10/14/09 PriceWatch Alert With $9.11 Break Even

Posted: Wednesday, October 14, 2009 8:15 AM EDT
By: Market Intelligence Center Staff

United States Natural Gas Fund, LP (PCX: UNG) closed yesterday at $11.31. So far UNG has hit a 52-week low of $8.94 and 52-week high of $31.42. UNG has been showing support around 11.10 and resistance in the 11.60 range. Technical indicators are Bearish. UNG appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at an Apr '10 10 covered call (UNY DJ) for a net debit in the $9.11 area. That is also the break even stock price for this trade. This covered call has an 185 day duration, provides 19.45% downside protection and a 9.77% assigned return rate for a 19.27% 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 UNG Jan '11 6 Call (ZZM AF) and selling the Apr '10 10 call (UNY DJ) for a $3.45 debit. The trade has an 185 day life and would provide 16.45% downside protection and a 15.94% assigned return rate for a 31.00% annualized return rate (for comparison purposes only). [WBA-Seven Summits Research]