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Daily Stock Market Equity and Options Trading Commentary

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Monday, June 1, 2009

50 Ways I've Beat the Market with Options Over the Past 6 Months

As shared in my blog, over the last 6 months I’ve been able to beat the market with some of the strategies I am about to share in this article. All of these strategies are buy/write strategies on rather volatile stocks, some much less than others. Given the Bull Run we’ve had I’ve been able to double my portfolio value and then some. If you’re bearish these strategies are NOT for you, but they may give you some ideas if you’re bullish or think the market will move sideways. I have not sold covered calls on any of the stocks over 50 days out, as I find it more profitable to write near the money for the coming expiration or next one out. Below are some examples of buy/writes I have used, and will be using for the June and July options expiration (all data as of pre-market June 1, 2009). All return % are expressed as if you were called away (exercised).

Option Strategy #1: Buy Apple (AAPL) stock and sell the June 135 Call option. Assuming you get called away this will return a profit of 3.3% in less than a month. For the same strike in July this would return a 5.4% profit.

Option Strategy #2: Buy Bank of America (BAC) stock and sell the June 11 Call option. Assuming you get called away this will return a profit of 5.43% in less than a month. For the same strike in July this would return a 9.6% profit.

Option Strategy #3: Buy Exxon Mobil (XOM) stock and sell the June 70 Call option. Assuming you get called away this will return a profit of 3.4% in less than a month. For the same strike in July this would return a 5% profit.

Option Strategy #4: Buy Caterpillar (CAT) stock and sell the June 35 Call option. Assuming you get called away this will return a profit of 3.9% in less than a month. For the same strike in July this would return a 6.3% profit.

Option Strategy #5: Buy SPDR S&P 500 (SPY) stock and sell the June 93 Call option. Assuming you get called away this will return a profit of 2.6% in less than a month. For the same strike in July this would return a 3.0% profit.

Option Strategy #6: Buy Research in Motion (RIMM) stock and sell the June 80 Call option. Assuming you get called away this will return a profit of 7.1% in less than a month. For the same strike in July this would return a 9.4% profit.

Option Strategy #7: Buy Microsoft (MSFT) stock and sell the June 20 Call option. Assuming you get called away this will return a profit of 1.2% in less than a month. For the same strike in July this would return a 2.7% profit.

Option Strategy #8: Buy SPDR Gold (GLD) stock and sell the June 96 Call option. Assuming you get called away this will return a profit of 2.3% in less than a month. For the same strike in July this would return a 4.0% profit.

Option Strategy #9: Buy Wells Fargo (WFC) stock and sell the June 25 Call option. Assuming you get called away this will return a profit of 4.1% in less than a month. For the same strike in July this would return a 8.0% profit.

Option Strategy #10: Buy Citigroup (C) stock and sell the June 4 Call option. Assuming you get called away this will return a profit of 10.8% in less than a month. For the same strike in July this would return a 13.4% profit.

Option Strategy #11: Buy SPDR Financial (XLF) stock and sell the June 12 Call option. Assuming you get called away this will return a profit of 3.3% in less than a month. For the same strike in July this would return a 5.9% profit.

Option Strategy #12: Buy Nasdaq 100 Trust (QQQQ) stock and sell the June 35 Call option. Assuming you get called away this will return a profit of 2% in less than a month. For the same strike in July this would return a 2.6% profit.

Option Strategy #13: Buy Ford (F) stock and sell the June 6 Call option. Assuming you get called away this will return a profit of 7.7% in less than a month. For the same strike in July this would return a 12.2% profit.

Option Strategy #14: Buy General Electric (GE) stock and sell the June 13 Call option. Assuming you get called away this will return a profit of 2.9% in less than a month. For the same strike in July this would return a 5.3% profit.

Option Strategy #15: Buy Direxion Russell 2000 3X Bull (TNA) stock and sell the June 27 Call option. Assuming you get called away this will return a profit of 9% in less than a month. For the same strike in July this would return a 13.9% profit.

Option Strategy #16: Buy Direxion Financial 3X Bull (FAS) stock and sell the June 10 Call option. Assuming you get called away this will return a profit of 10% in less than a month. For the same strike in July this would return a 16.5% profit.

Option Strategy #17: Buy Direxion Financial 3X Bear (FAZ) stock and sell the June 5 Call option. Assuming you get called away this will return a profit of 16% in less than a month. For the same strike in July this would return a 23.4% profit.

Option Strategy #18: Buy United States Oil Fund (USO) stock and sell the June 37 Call option. Assuming you get called away this will return a profit of 4.4% in less than a month. For the same strike in July this would return a 6.7% profit.

Option Strategy #19: Buy Proshares Crude Oil 2X Bull (UCO) stock and sell the June 12 Call option. Assuming you get called away this will return a profit of 5.3% in less than a month. For the 12.50 strike in July this would return a 11% profit.

Option Strategy #20: Buy Direxion Large Cap 3X Bear (BGZ) stock and sell the June 36 Call option. Assuming you get called away this will return a profit of 7.4 in less than a month. For the same strike in July this would return a 11.4% profit.

Option Strategy #21: Buy Direxion Large Cap 3X Bull (BGU) stock and sell the June 34 Call option. Assuming you get called away this will return a profit of 6% in less than a month. For the same strike in July this would return a 9.8% profit.

Option Strategy #22: Buy Palm (PALM) stock and sell the June 12 Call option. Assuming you get called away this will return a profit of 7.9% in less than a month. For the same strike in July this would return a 12.4% profit.

Option Strategy #23: Buy Proshares Financials 2X Bull (UYG) stock and sell the June 4 Call option. Assuming you get called away this will return a profit of 4.6% in less than a month. For the same strike in July this would return a 9.5% profit.

Option Strategy #24: Buy Goldman Sachs (GS) stock and sell the June 145 Call option. Assuming you get called away this will return a profit of 4.1% in less than a month. For the same strike in July this would return a 6.7% profit.

Option Strategy #25: Buy Dow Diamonds (DIA) stock and sell the June 85 Call option. Assuming you get called away this will return a profit of 2.0% in less than a month. For the same strike in July this would return a 2.5% profit.

If the market goes down, and the stock does not get called away I usually write the stock out for the same strike for the next month (lowering my cost even more). You must be willing to own the stock for any of these strategies, as if the stock goes down you will not be called out and will have the underlying stock in your portfolio. If you don’t get called out the good news is that you will have the stock at an overall lower cost due to the premium received on the covered call.

Use caution when buying/selling options. The more volatile the stock the higher the premium on the option (this should make sense). If you are more bullish/bearish you’ll want to adjust the strike price. These strategies have kept me from beating the market in the past 6 months. If you’re bearish write deeper in the money calls, you will not return as much, but if you get called away, and the overall market is down you’re sure to outperform the market.

For an excel spreadsheet of these 25 strategies ranked in order from least to greatest % return for both June and July visit my blog.

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