Diamonds Trust, Series 1 (DIA) 11/3/09 PriceWatch Alert With $94.20 Break Even

Posted: Tuesday, November 03, 2009 8:32 AM EDT
By: Market Intelligence Center Staff

Diamonds Trust, Series 1 (PCX: DIA) closed yesterday at $97.85. So far DIA has hit a 52-week low of $64.78 and 52-week high of $101.20. DIA has been showing support around 95.71 and resistance in the 100.07 range. Technical indicators are Bullish. DIA appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Dec '09 97 covered call (BQD LS) for a net debit in the $94.20 area. That is also the break even stock price for this trade. This covered call has a 58 day duration, provides 3.73% downside protection and a 2.97% assigned return rate for an 18.71% 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 DIA Jan '11 65 Call (ZAV AM) and selling the Dec '09 97 call (BQD LS) for a $29.75 debit. The trade has a 58 day life and would provide 3.17% downside protection and a 7.56% assigned return rate for a 48.00% annualized return rate (for comparison purposes only). [ATU-Seven Summits Research]