streetTRACKS Gold Shares (GLD) 11/20/09 PriceWatch Alert Up To 3.56% Downside Protection

Posted: Friday, November 20, 2009 8:34 AM EDT
By: Market Intelligence Center Staff

streetTRACKS Gold Shares (PCX: GLD) closed yesterday at $112.30. So far GLD has hit a 52-week low of $72.43 and 52-week high of $113.09. GLD has been showing support around 110.18 and resistance in the 113.46 range. Technical indicators are Bullish. GLD appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Jan '10 112 covered call (GCZ AH) for a net debit in the $108.30 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 3.56% downside protection and a 3.42% assigned return rate for a 21.88% 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 GLD Jan '11 75 Call (OQA AW) and selling the Jan '10 112 call (GCZ AH) for a $34.90 debit. The trade has a 57 day life and would provide 2.14% downside protection and a 6.02% assigned return rate for a 39.00% annualized return rate (for comparison purposes only). [FBB-Seven Summits Research]