Ultra S&P500 ProShares (SSO) 11/16/09 PriceWatch Alert Targets 11.03% Downside Protection

Posted: Monday, November 16, 2009 8:44 AM EDT
By: Market Intelligence Center Staff

Ultra S&P500 ProShares (PCX: SSO) ended the last trading session at $36.73. 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 35.75 and resistance in the 37.53 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 36 covered call (SOJ CJ) for a net debit in the $32.68 area. That is also the break even stock price for this trade. This covered call has a 124 day duration, provides 11.03% downside protection and a 10.16% assigned return rate for a 29.90% 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 18 Call (ZFO AR) and selling the Mar '10 36 call (SOJ CJ) for a $15.05 debit. The trade has a 124 day life and would provide 10.02% downside protection and a 19.60% assigned return rate for a 58.00% annualized return rate (for comparison purposes only). [ABR-Seven Summits Research]