UltraShort S&P500 ProShares (SDS) 11/13/09 PriceWatch Alert Support Down To $35.79

Posted: Friday, November 13, 2009 8:02 AM EDT
By: Market Intelligence Center Staff

UltraShort S&P500 ProShares (PCX: SDS) closed yesterday at $37.27. So far SDS has hit a 52-week low of $36.10 and 52-week high of $133.20. SDS has been showing support around 35.79 and resistance in the 38.23 range. Technical indicators are Bearish. SDS appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Jan '10 36 covered call (SSH AJ) for a net debit in the $33.82 area. That is also the break even stock price for this trade. This covered call has a 64 day duration, provides 9.26% downside protection and a 6.45% assigned return rate for a 36.76% 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 SDS Jan '11 20 Call (VKB AT) and selling the Jan '10 36 call (SSH AJ) for a $14.50 debit. The trade has a 64 day life and would provide 7.43% downside protection and a 10.34% assigned return rate for a 59.00% annualized return rate (for comparison purposes only). [FBB-Seven Summits Research]