iShares Lehman 20+ Year Treasury Bond Fund (TLT) 11/20/09 PriceWatch Alert At $92.49 Break Even

Posted: Friday, November 20, 2009 8:45 AM EDT
By: Market Intelligence Center Staff

iShares Lehman 20+ Year Treasury Bond Fund (PCX: TLT) closed yesterday at $95.14. So far TLT has hit a 52-week low of $87.56 and 52-week high of $123.15. TLT has been showing support around 94.38 and resistance in the 96.20 range. Technical indicators are Bullish. TLT appears on the Investors Observer Select ETF and HOLDR list. For a hedged play on this stock, look at a Mar '10 95 covered call (ILT CQ) for a net debit in the $92.49 area. That is also the break even stock price for this trade. This covered call has a 120 day duration, provides 2.79% downside protection and a 2.71% assigned return rate for an 8.25% 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 TLT Jan '11 85 Call (VJL AG) and selling the Mar '10 95 call (ILT CQ) for an $8.25 debit. The trade has a 120 day life and would provide 1.99% downside protection and a 21.21% assigned return rate for a 65.00% annualized return rate (for comparison purposes only). [FBB-Seven Summits Research]