UltraShort Financials ProShares (SKF) 11/11/09 PriceWatch Alert Could Hit 19.80% Return

Posted: Wednesday, November 11, 2009 8:04 AM EDT
By: Market Intelligence Center Staff

UltraShort Financials ProShares (PCX: SKF) closed yesterday at $24.38. 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 23.70 and resistance in the 25.16 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 $18.43 area. That is also the break even stock price for this trade. This covered call has a 157 day duration, provides 24.41% downside protection and an 8.52% assigned return rate for a 19.80% 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 4 Call (ZDF AD) and selling the Apr '10 20 call (FFW DT) for a $14.85 debit. The trade has a 157 day life and would provide 22.68% downside protection and a 7.74% assigned return rate for an 18.00% annualized return rate (for comparison purposes only). [WBA-Seven Summits Research]