Tuesday, June 30, 2009

Establish United States Natural Gas Fund ETF Covered Calls


A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of the United States Natural Gas Fund ETF(UNG) covered calls as follows:

Established the United States Natural Gas Fund ETF(UNG) Covered Calls for Jul09:
06/30/09 Bought 1000 UNG @ $13.92
06/30/09 Sold 10 UNG Jul09 $14.00 Calls @ $.75

UNG invests in near-month futures contracts and tracks the price of natural gas. The Covered Calls advisor believes that natural gas is a cost effective, clean, and abundant alternative fuel and will be an increasingly important resource in fulfilling future U.S. energy needs. At its current price of $3.85, this advisor further believes that Nat Gas now trades at the lower end of its likely price range for the next several months. Therefore, now should be a good time to establish a position in this investment.

Some potential results from this transaction are:
Absolute Return if Stock Price Unchanged at $13.92: +5.4%
Annualized Return If Unchanged (ARIU): +108.4%

Absolute Return if Exercised at $14.00: +6.0%
Annualized Return If Exercised (ARIE): +120.9%

Downside Breakeven Price Point: $13.17
Downside Breakeven Protection: 5.4%

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