United States Natural Gas Fund, LP (UNG) 10/22/09 PriceWatch Alert Shows Neutral Technicals

Posted: Thursday, October 22, 2009 8:23 AM EDT
By: Market Intelligence Center Staff

United States Natural Gas Fund, LP (PCX: UNG) closed yesterday at $11.70. 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 11.40 and resistance in the 12.24 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 $10.00 area. That is also the break even stock price for this trade. This covered call has a 177 day duration, provides 14.53% downside protection and a 10.00% assigned return rate for a 20.62% 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 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 177 day life and would provide 12.39% downside protection and a 17.65% assigned return rate for a 36.00% annualized return rate (for comparison purposes only). [THA-Seven Summits Research]