Ultra Petroleum (UPL) 11/9/09 PriceWatch Alert With 6.93% Downside Protection

Posted: Monday, November 09, 2009 8:36 AM EDT
By: Market Intelligence Center Staff

Ultra Petroleum (NYSE: UPL) ended the last trading session at $47.59. So far the stock has hit a 52-week low of $28.85 and 52-week high of $57.21. Ultra Petroleum stock has been showing support around 46.19 and resistance in the 49.39 range. Technical indicators for the stock are Bearish and S&P gives UPL a positive 4 STAR (out of 5) buy rating. UPL appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 48 covered call (UPL AX) for a net debit in the $44.29 area. That is also the break even stock price for this trade. This covered call has a 68 day duration, provides 6.93% downside protection and an 8.38% assigned return rate for a 44.96% 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 UPL Jan '11 20 Call (OZH AD) and selling the Jan '10 48 call (UPL AX) for a $25.05 debit. The trade has a 68 day life and would provide 5.34% downside protection and an 11.78% assigned return rate for a 63.00% annualized return rate (for comparison purposes only). Ultra Petroleum does not pay dividends at this time. [ABR-Seven Summits Research]