United States Oil Fund, LP (USO) 11/3/09 PriceWatch Alert Could Hit 30.63% Return

Posted: Tuesday, November 03, 2009 8:36 AM EDT

United States Oil Fund, LP (PCX: USO) closed yesterday at $39.97. So far USO has hit a 52-week low of $22.74 and 52-week high of $58.78. USO has been showing support around 38.78 and resistance in the 40.82 range. Technical indicators are Bullish. USO appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Jan '10 39 covered call (UBO AM) for a net debit in the $36.72 area. That is also the break even stock price for this trade. This covered call has a 74 day duration, provides 8.13% downside protection and a 6.21% assigned return rate for a 30.63% 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 USO Jan '11 20 Call (OTJ AT) and selling the Jan '10 39 call (UBO AM) for a $17.10 debit. The trade has a 74 day life and would provide 7.18% downside protection and an 11.11% assigned return rate for a 55.00% annualized return rate (for comparison purposes only). [ATU-Seven Summits Research]

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