United States Natural Gas Fund, LP (UNG) 10/21/09 PriceWatch Alert Up To 18.27% Return

Posted: Wednesday, October 21, 2009 8:13 AM EDT
By: Market Intelligence Center Staff

United States Natural Gas Fund, LP (PCX: UNG) closed yesterday at $11.95. 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 11.75 and resistance in the 12.17 range. Technical indicators are Neutral. 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 $10.10 area. That is also the break even stock price for this trade. This covered call has a 178 day duration, provides 15.48% downside protection and an 8.91% assigned return rate for an 18.27% 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 11 call (UNY DK) for a $4.30 debit. The trade has a 178 day life and would provide 13.81% downside protection and a 16.28% assigned return rate for a 33.00% annualized return rate (for comparison purposes only). [WBA-Seven Summits Research]