Ultra Basic Materials ProShares (UYM) 11/16/09 PriceWatch Alert Could Hit 28.28% Return

Posted: Monday, November 16, 2009 8:40 AM EDT
By: Market Intelligence Center Staff

Ultra Basic Materials ProShares (PCX: UYM) ended the last trading session at $30.40. So far UYM has hit a 52-week low of $7.85 and 52-week high of $31.50. UYM has been showing support around 29.19 and resistance in the 31.53 range. Technical indicators are Bullish. UYM appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Feb '10 26 covered call (UUZ BZ) for a net debit in the $24.20 area. That is also the break even stock price for this trade. This covered call has a 96 day duration, provides 20.39% downside protection and a 7.44% assigned return rate for a 28.28% 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 UYM Jan '11 12 Call (XYU AF) and selling the Feb '10 26 call (UUZ BZ) for a $13.00 debit. The trade has a 96 day life and would provide 17.76% downside protection and a 7.69% assigned return rate for a 29.00% annualized return rate (for comparison purposes only). [ABR-Seven Summits Research]