PowerShares DB Commodity Index Tracking Fund (DBC) 11/20/09 PriceWatch Alert With $22.54 Break Even

Posted: Friday, November 20, 2009 8:24 AM EDT
By: Market Intelligence Center Staff

PowerShares DB Commodity Index Tracking Fund (PCX: DBC) closed yesterday at $24.29. So far DBC has hit a 52-week low of $17.94 and 52-week high of $25.02. DBC has been showing support around 23.89 and resistance in the 24.71 range. Technical indicators are Bullish. DBC appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at an Apr '10 24 covered call (DBC DX) for a net debit in the $22.54 area. That is also the break even stock price for this trade. This covered call has a 148 day duration, provides 7.20% downside protection and a 6.48% assigned return rate for a 15.97% 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 DBC Jan '11 15 Call (VCZ AO) and selling the Apr '10 24 call (DBC DX) for a $7.80 debit. The trade has a 148 day life and would provide 6.13% downside protection and a 15.38% assigned return rate for a 38.00% annualized return rate (for comparison purposes only). [FBB-Seven Summits Research]