iShares Silver Trust (SLV) 11/16/09 PriceWatch Alert Targets 12.94% Downside Protection

Posted: Monday, November 16, 2009 8:39 AM EDT
By: Market Intelligence Center Staff

iShares Silver Trust (PCX: SLV) ended the last trading session at $17.15. So far SLV has hit a 52-week low of $8.71 and 52-week high of $17.64. SLV has been showing support around 16.58 and resistance in the 17.44 range. Technical indicators are Bullish. SLV appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at an Apr '10 16 covered call (SLV DP) for a net debit in the $14.93 area. That is also the break even stock price for this trade. This covered call has a 152 day duration, provides 12.94% downside protection and a 7.17% assigned return rate for a 17.21% 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 SLV Jan '11 10 Call (XUX AJ) and selling the Apr '10 16 call (SLV DP) for a $5.23 debit. The trade has a 152 day life and would provide 11.20% downside protection and a 14.72% assigned return rate for a 35.00% annualized return rate (for comparison purposes only). [ABR-Seven Summits Research]