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Daily Stock Market Equity and Options Trading Commentary

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Thursday, July 16, 2009

Direxion ETF's: High Delta High Return 1 Day Trade Ideas

With just 1 day left being Friday July 17, 2009, for the July options expiration, there are still several Buy/Write option strategies which will yield high returns (considering the probabilities and it is just 1 trading day). In this post I am using the highly volatile Direxion ETF shares, which seek to return 3 times a specific basket of stocks.

To understand this post and how to open the Buy/Write option strategy click here or check out my options trading E-Books.

All of the ETF option ideas listed in this post have high probability of expiring above the indicated strike price by market close Friday. All of these option call contracts are written in the money which means they'll give you significant downside protection, in case the ETF falls after purchased you'll be protected for the % indicated.

HOW TO READ THE TABLE

The first ETF listed in the table below is the Direxion Daily Large Cap Bull 3X Shares (BGU). An example of how the Buy/Write option Strategy on BGU would be interpreted as:

Buy the Direxion Daily Large Cap Bull 3X Shares (BGU) ETF and sell the July 35 Call option. This will give you downside protection of 3.53%. The current options market is factoring in a 73.2% probability BGU will close at or above 35 a share by market close Friday returning 0.86%.

All data as of market close Thursday July 16, 2009.

ETF Strike Return % Protect% Probability%





Direxion Daily Large Cap Bull 3X Shares (BGU) 35 0.86 3.53 73.2
Direxion Daily Mid Cap Bull 3X Shares (MWJ) 60 1.10 2.83 65.7
Direxion Daily Small Cap Bull 3X Shares (TNA) 29 1.42 3.38 80.2
Direxion Daily Energy Bull 3X Shares (ERX) 28 0.94 3.92 72.6
Direxion Daily Technology Bull 3X Shares (TYH) 95 0.22 6.42 93.3
Direxion Daily Financial Bull 3X Shares (FAS) 47 1.56 4.93 69.0
Direxion Daily Developed Markets Bull 3X Shares (DZK) 50 0.09 8.72 95.7
Direxion Daily Emerging Markets Bull 3X Shares (EDC) 85 1.03 4.05 71.7
Direxion Daily 10 Year Treasury Bull 3X Shares (TYD) 45 0.31 8.75 90.8
Direxion Daily 30 Year Treasury Bull 3X Shares (TMF) 38 1.13 3.22 67.1





Direxion Daily Large Cap Bear 3X Shares (BGZ) 31 3.33 6.99 84.0
Direxion Daily Small Cap Bear 3X Shares (TZA) 17.5 0.25 14.25 97.5
Direxion Daily Energy Bear 3X Shares (ERY) 21 1.11 4.07 74.0
Direxion Daily Technology Bear 3X Shares (TYP) 17.5 0.77 4.67 76.6
Direxion Daily Financial Bear 3X Shares (FAZ) 39 0.53 6.35 84.4
Direxion Daily Developed Markets Bear 3X Shares (DPK) 25 1.30 15.45 85.2





Averages
0.84 5.17 77.93

From the analysis above the two best ETF's look to be the Large Cap Bear (BGZ), and the Developed Markets Bear (DPK); this is because both are higher than the average in all three categories. However the volume on the DPK is very light making it almost illiquid to trade options on, therefore the ETF which happens to be the best based on this analysis is the BGZ.

Below is a printable spreadsheet, which shows which ETF's are above average by highlighting the % in a color (click on image to enlarge and print).



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