UBS (UBS) 11/6/09 PriceWatch Alert Technicals Showing Bearish

Posted: Friday, November 06, 2009 8:23 AM EDT

UBS (NYSE: UBS) closed yesterday at $16.69. 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 16.30 and resistance in the 16.88 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 15 covered call (UBS FC) for a net debit in the $13.69 area. That is also the break even stock price for this trade. This covered call has a 225 day duration, provides 17.97% downside protection and a 9.57% assigned return rate for a 15.52% 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 15 call (UBS FC) for a $6.50 debit. The trade has a 225 day life and would provide 16.12% downside protection and a 15.38% 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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