UltraShort S&P500 ProShares (SDS) 11/17/09 PriceWatch Alert Shows Bearish Technicals

Posted: Tuesday, November 17, 2009 8:32 AM EDT
By: Market Intelligence Center Staff

UltraShort S&P500 ProShares (PCX: SDS) closed yesterday at $35.82. So far SDS has hit a 52-week low of $35.50 and 52-week high of $133.20. SDS has been showing support around 34.99 and resistance in the 36.85 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 Mar '10 35 covered call (SSH CU) for a net debit in the $31.57 area. That is also the break even stock price for this trade. This covered call has a 123 day duration, provides 11.86% downside protection and a 10.86% assigned return rate for a 32.24% 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 24 Call (VKB AD) and selling the Mar '10 35 call (SSH CU) for a $9.25 debit. The trade has a 123 day life and would provide 7.17% downside protection and an 18.92% assigned return rate for a 56.00% annualized return rate (for comparison purposes only). [ATU-Seven Summits Research]