UltraShort QQQ ProShares (QID) 11/18/09 PriceWatch Alert Bearish Price Movement

Posted: Wednesday, November 18, 2009 8:23 AM EDT
By: Market Intelligence Center Staff

UltraShort QQQ ProShares (PCX: QID) closed yesterday at $20.28. So far QID has hit a 52-week low of $20.24 and 52-week high of $102.60. QID has been showing support around 20.05 and resistance in the 20.73 range. Technical indicators are Bearish. QID appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at an Apr '10 18 covered call (QOI DR) for a net debit in the $16.98 area. That is also the break even stock price for this trade. This covered call has a 150 day duration, provides 16.27% downside protection and a 6.01% assigned return rate for a 14.62% 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 QID Jan '11 10 Call (ZVT AJ) and selling the Apr '10 18 call (QOI DR) for a $7.60 debit. The trade has a 150 day life and would provide 13.21% downside protection and a 5.26% assigned return rate for a 13.00% annualized return rate (for comparison purposes only). [WBA-Seven Summits Research]