Nasdaq-100 Index Tracking Stock (QQQQ) 11/18/09 PriceWatch Alert With Support Around $44.13

Posted: Wednesday, November 18, 2009 8:15 AM EDT
By: Market Intelligence Center Staff

Nasdaq-100 Index Tracking Stock (NGM: QQQQ) closed yesterday at $44.60. So far QQQQ has hit a 52-week low of $25.05 and 52-week high of $44.65. QQQQ has been showing support around 44.13 and resistance in the 44.83 range. Technical indicators are Bullish. QQQQ appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Jan '10 44 covered call (QQQ AR) for a net debit in the $42.79 area. That is also the break even stock price for this trade. This covered call has a 59 day duration, provides 4.06% downside protection and a 2.83% assigned return rate for a 17.49% 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 QQQQ Jan '11 24 Call (XZA AX) and selling the Jan '10 44 call (QQQ AR) for a $19.03 debit. The trade has a 59 day life and would provide 3.52% downside protection and a 5.10% assigned return rate for a 32.00% annualized return rate (for comparison purposes only). [WBA-Seven Summits Research]