UltraShort Financials ProShares (SKF) 11/19/09 PriceWatch Alert At $17.62 Break Even

Posted: Thursday, November 19, 2009 8:05 AM EDT
By: Market Intelligence Center Staff

UltraShort Financials ProShares (PCX: SKF) closed yesterday at $23.62. So far SKF has hit a 52-week low of $22.36 and 52-week high of $303.82. SKF has been showing support around 23.29 and resistance in the 24.23 range. Technical indicators are Bearish. SKF appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at an Apr '10 19 covered call (FFW DS) for a net debit in the $17.62 area. That is also the break even stock price for this trade. This covered call has a 149 day duration, provides 25.40% downside protection and a 7.83% assigned return rate for a 19.19% 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 SKF Jan '11 5 Call (ZDF AE) and selling the Apr '10 19 call (FFW DS) for a $13.10 debit. The trade has a 149 day life and would provide 23.37% downside protection and a 6.87% assigned return rate for a 17.00% annualized return rate (for comparison purposes only). [THA-Seven Summits Research]