UltraShort 20+ Year Treasury ProShares (TBT) 11/20/09 PriceWatch Alert Targets 4.81% Downside Protection

Posted: Friday, November 20, 2009 8:36 AM EDT
By: Market Intelligence Center Staff

UltraShort 20+ Year Treasury ProShares (PCX: TBT) closed yesterday at $45.74. So far TBT has hit a 52-week low of $35.51 and 52-week high of $59.79. TBT has been showing support around 44.77 and resistance in the 46.47 range. Technical indicators are Bearish. TBT appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Jan '10 45 covered call (TBT AS) for a net debit in the $43.54 area. That is also the break even stock price for this trade. This covered call has a 57 day duration, provides 4.81% downside protection and a 3.35% assigned return rate for a 21.47% 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 TBT Jan '11 16 Call (VJZ AP) and selling the Jan '10 45 call (TBT AS) for a $27.80 debit. The trade has a 57 day life and would provide 4.24% downside protection and a 4.32% assigned return rate for a 28.00% annualized return rate (for comparison purposes only). [FBB-Seven Summits Research]