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Friday, June 19, 2009

For Quadruple Witching Day, 1+% Return with 1 Day Options in the Money

It's Friday June 19, 2009 and it happens to be Quadruple Witching. I assume today will be very volatile and that volatility will explode in the final hour or so of trading. That said, I thought it would be interesting to lay out a few option buy/write ideas that- if they hold at or above current levels (in the money) - will yield at least 1% in one day.

I understand that 1% isn't that much compared to some stocks that spike 25% in one day, but if this strategy was used at every options expiration and the underlying stock closes above the indicated strike, the method would add some additional cash to your portfolio.

All call options listed are currently in the money and if they happen to expire less than the strike price, the premium received will provide at least 1.2% downside protection.

These are extremely volatile stocks or ETFs (2X and 3X leveraged ETFs - see why I think they're DANGEROUS here).

All data as of pre-market Friday June 19, 2009.

The ideas outlined in this article are all the buy/write option strategy. If you plan on opening any of these positions, note that if the stock/ETF closes at or below the indicated strike price you'll end up with the stock - so be sure you're okay with that before you think of opening the position. If you have the stock already and are thinking of selling it, you're one up and can use this strategy to yield some additional gains. Of course, commissions play a major role as opening few of these contracts most likely won't generate too much. For more on the buy/write option strategy check out my option E-Books.

Buy Write Option Idea #1: Buy Palm (PALM) stock and sell the June 13 Call option. This will give you downside protection of 3.3% on the stock, and a return of 2.8% assuming Palm closes above $13. The current options market is factoring in a 53.9% chance this will be above the indicated strike at close.

Buy Write Option Idea #2: Buy Direxion Daily Financial Bull 3X (FAS) stock and sell the June 9 Call option. This will give you downside protection of 3.3% on the stock, and a return of 1.6% assuming FAS closes above $9. The current options market is factoring in a 59.4% chance this will be above the indicated strike at close.

Buy Write Option Idea #3: Buy Direxion Daily Small Cap Bull 3X (TNA) stock and sell the June 28 Call option. This will give you downside protection of 2.7% on the stock, and a return of 2.0% assuming TNA closes above $28. The current options market is factoring in a 55.5% chance this will be above the indicated strike at close.

Buy Write Option Idea #4: Buy Direxion Daily Large Cap Bull 3X (BGU) stock and sell the June 33 Call option. This will give you downside protection of 3.6% on the stock, and a return of 1.4% assuming BGU closes above $33. The current options market is factoring in a 66.7% chance this will be above the indicated strike at close.

Buy Write Option Idea #5: Buy Direxion Daily Large Cap Bear 3X (BGZ) stock and sell the June 36 Call option. This will give you downside protection of 1.8% on the stock, and a return of 1.4% assuming BGZ closes above $36. The current options market is factoring in a 52.2% chance this will be above the indicated strike at close.

Buy Write Option Idea #6: Buy ProShares UltraShort S&P500 2X (SDS) stock and sell the June 56 Call option. This will give you downside protection of 1.2% on the stock, and a return of 1% assuming SDS closes above $56. The current options market is factoring in a 48.8% chance this will be above the indicated strike at close.

Buy Write Option Idea #7: Buy ProShares Ultra S&P500 (SSO) stock and sell the June 26 Call option. This will give you downside protection of 1.5% on the stock, and a return of 1.3% assuming SSO closes above $26. The current options market is factoring in a 52.9% chance this will be above the indicated strike at close.

Buy Write Option Idea #8: Buy ProShares Ultra Oil & Gas 2X (DIG) stock and sell the June 28 Call option. This will give you downside protection of 2.6% on the stock, and a return of 1.5% assuming DIG closes above $28. The current options market is factoring in a 63.4% chance this will be above the indicated strike at close.

Buy Write Option Idea #9: Buy ProShares UltraShort Financials 2X (SKF) stock and sell the June 43 Call option. This will give you downside protection of 2.2% on the stock, and a return of 1.8% assuming SKF closes above $43. The current options market is factoring in a 54.2% chance this will be above the indicated strike at close.

Buy Write Option Idea #10: Buy ProShares Ultra Basic Materials 2X (UYM) stock and sell the June 18 Call option. This will give you downside protection of 1.8% on the stock, and a return of 1.2% assuming UYM closes above $18. The current options market is factoring in a 54.1% chance this will be above the indicated strike at close.

Indicated strike may need to be adjusted throughout the trading day to reflect better % gains.

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