UBS (UBS) 10/30/09 PriceWatch Alert Down To $14.44 Break Even

Posted: Friday, October 30, 2009 8:30 AM EDT

UBS (NYSE: UBS) closed yesterday at $17.44. So far the stock has hit a 52-week low of $7.04 and 52-week high of $19.32. UBS stock has been showing support around 17.01 and resistance in the 17.71 range. Technical indicators for the stock are Bearish and S&P gives UBS a neutral 3 STAR (out of 5) hold rating. UBS appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jun '10 16 covered call (UBS FP) for a net debit in the $14.44 area. That is also the break even stock price for this trade. This covered call has a 232 day duration, provides 17.20% downside protection and a 10.80% assigned return rate for a 17.00% 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 UBS Jan '11 7.50 Call (ODX AU) and selling the Jun '10 16 call (UBS FP) for a $7.35 debit. The trade has a 232 day life and would provide 14.85% downside protection and a 15.65% assigned return rate for a 25.00% annualized return rate (for comparison purposes only). UBS does not pay dividends at this time. [FBB-Seven Summits Research]

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