United States Natural Gas Fund, LP (UNG) PriceWatch Alert for October 27, 2009

Posted: Tuesday, October 27, 2009 8:45 AM EDT
By: Market Intelligence Center Staff

United States Natural Gas Fund, LP (PCX: UNG) closed yesterday at $10.75. 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 10.62 and resistance in the 11.02 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 $9.05 area. That is also the break even stock price for this trade. This covered call has a 172 day duration, provides 15.81% downside protection and a 10.50% assigned return rate for a 22.28% 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 $3.35 debit. The trade has a 172 day life and would provide 13.02% downside protection and a 19.40% assigned return rate for a 41.00% annualized return rate (for comparison purposes only). [ATU-Seven Summits Research]