UltraShort Financials ProShares (SKF) 11/12/09 PriceWatch Alert Shows Bearish Technicals

Posted: Thursday, November 12, 2009 8:32 AM EDT
By: Market Intelligence Center Staff

UltraShort Financials ProShares (PCX: SKF) closed yesterday at $23.79. 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 22.98 and resistance in the 24.52 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 $18.24 area. That is also the break even stock price for this trade. This covered call has a 156 day duration, provides 23.33% downside protection and a 9.65% assigned return rate for a 22.58% 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 $13.90 debit. The trade has a 156 day life and would provide 20.55% downside protection and a 7.91% assigned return rate for a 19.00% annualized return rate (for comparison purposes only). [THA-Seven Summits Research]