Ultra S&P500 ProShares (SSO) 11/12/09 PriceWatch Alert At $33.38 Break Even

Posted: Thursday, November 12, 2009 8:09 AM EDT
By: Market Intelligence Center Staff

Ultra S&P500 ProShares (PCX: SSO) closed yesterday at $37.08. So far SSO has hit a 52-week low of $14.16 and 52-week high of $37.54. SSO has been showing support around 36.33 and resistance in the 37.91 range. Technical indicators are Bullish. SSO appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Mar '10 37 covered call (SOJ CK) for a net debit in the $33.38 area. That is also the break even stock price for this trade. This covered call has a 128 day duration, provides 9.98% downside protection and a 10.84% assigned return rate for a 30.92% 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 SSO Jan '11 21 Call (ZFO AU) and selling the Mar '10 37 call (SOJ CK) for a $13.20 debit. The trade has a 128 day life and would provide 7.77% downside protection and a 21.21% assigned return rate for a 60.00% annualized return rate (for comparison purposes only). [THA-Seven Summits Research]