United States Natural Gas Fund, LP (UNG) 10/20/09 PriceWatch Alert With Support Around $11.25

Posted: Tuesday, October 20, 2009 8:38 AM EDT
By: Market Intelligence Center Staff

United States Natural Gas Fund, LP (PCX: UNG) closed yesterday at $11.63. 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 11.25 and resistance in the 12.03 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 11 covered call (UNY DK) for a net debit in the $9.93 area. That is also the break even stock price for this trade. This covered call has a 179 day duration, provides 14.62% downside protection and a 10.78% assigned return rate for a 21.97% 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 11 call (UNY DK) for a $4.25 debit. The trade has a 179 day life and would provide 11.87% downside protection and a 17.65% assigned return rate for a 36.00% annualized return rate (for comparison purposes only). [ATU-Seven Summits Research]