UltraShort Financials ProShares (SKF) 11/13/09 PriceWatch Alert Targets 21.45% Return

Posted: Friday, November 13, 2009 8:10 AM EDT
By: Market Intelligence Center Staff

UltraShort Financials ProShares (PCX: SKF) closed yesterday at $24.58. 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 23.19 and resistance in the 25.41 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 $18.33 area. That is also the break even stock price for this trade. This covered call has a 155 day duration, provides 25.43% downside protection and a 9.11% assigned return rate for a 21.45% 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 $13.50 debit. The trade has a 155 day life and would provide 24.74% downside protection and an 11.11% assigned return rate for a 26.00% annualized return rate (for comparison purposes only). [FBB-Seven Summits Research]