UltraShort Financials ProShares (SKF) 11/10/09 PriceWatch Alert Down To $18.21 Break Even

Posted: Tuesday, November 10, 2009 8:05 AM EDT
By: Market Intelligence Center Staff

UltraShort Financials ProShares (PCX: SKF) closed yesterday at $24.21. So far SKF has hit a 52-week low of $22.36 and 52-week high of $303.82. SKF has been showing support around 23.25 and resistance in the 26.05 range. Technical indicators are Bearish. SKF appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at an Apr '10 20 covered call (FFW DT) for a net debit in the $18.21 area. That is also the break even stock price for this trade. This covered call has a 158 day duration, provides 24.78% downside protection and a 9.83% assigned return rate for a 22.71% 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 SKF Jan '11 5 Call (ZDF AE) and selling the Apr '10 20 call (FFW DT) for a $14.25 debit. The trade has a 158 day life and would provide 20.49% downside protection and a 5.26% assigned return rate for a 12.00% annualized return rate (for comparison purposes only). [ATU-Seven Summits Research]