PowerShares DB Agriculture Fund (DBA) 11/18/09 PriceWatch Alert With 6.67% Downside Protection

Posted: Wednesday, November 18, 2009 8:04 AM EDT
By: Market Intelligence Center Staff

PowerShares DB Agriculture Fund (PCX: DBA) closed yesterday at $26.24. So far DBA has hit a 52-week low of $21.52 and 52-week high of $28.87. DBA has been showing support around 25.75 and resistance in the 26.55 range. Technical indicators are Bullish. DBA appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at an Apr '10 26 covered call (DBA DZ) for a net debit in the $24.49 area. That is also the break even stock price for this trade. This covered call has a 150 day duration, provides 6.67% downside protection and a 6.17% assigned return rate for a 15.00% 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 DBA Jan '11 15 Call (ZBV AO) and selling the Apr '10 26 call (DBA DZ) for a $9.60 debit. The trade has a 150 day life and would provide 6.25% downside protection and a 14.58% assigned return rate for a 35.00% annualized return rate (for comparison purposes only). [WBA-Seven Summits Research]