25 Options Strategies for a Bullish or Flat Market

As shared in my blog, over the last six 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 (for more on options trading click here) 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.

I update my Seeking Alpha blog as much as possible to share these strategies with the Seeking Alpha community.

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).

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.
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.
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.
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.
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.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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.
12. 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.
13. 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.
14. 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.
15. 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.
16. 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.
17. 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.
18. 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.
19. 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.
20. 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.
21. 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.
22. 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.
23. 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.
24. 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.
25. 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.

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.

Disclosure: Long BAC, CAT, FAS, FAZ, UCO, PALM, UYG, GS

Comments

[BioBoy:]

"These strategies have kept me from beating the market in the past 6 months." Is that an admission or an excuse?

Jun 01 06:08 AM

[WACG:]

I looked at the first two of your "plays" (AAPL & BAC) and they are ALREADY losers. The market isn't even open yet. I stopped reading after that but have a nice day and thanks for playing!

Jun 01 08:37 AM

[Marco Hickey:]

Neither, it's a typo. From the rest of the article you should be able to see that. Thanks for catching that!


On Jun 01 06:08 AM BioBoy wrote:

> "These strategies have kept me from beating the market in the past
> 6 months." Is that an admission or an excuse?

Jun 01 09:30 AM

[adelante:]

Good article, but your title is very misleading. It's not "25 Options Strategies," but rather "One Optioin Strategy for 25 Stocks for a Flat Market." Note: there are only 25 Options Strategies TOTAL.
When I posted your link to our blog on Yahoo, [justcoveredcalls], I was corrected-- although I was just posting the link "as is." Thanks.

Jun 01 09:36 AM

[Marco Hickey:]

You may not understand the options market. This data was taken even before the pre-market tradingtoday, and reflects Friday's close. The options market does not open (update bid/ask) until 9:30.

As of right now (9:38), I have the AAPL strategy having a bid of $6.25 at the $135 strike. Apple currently trades at $137.24. If it stays above $135 by expiration that is 2.9% return in 19 days.

As for BAC (9.38) I have bid of $0.91 at 11 strike which comes to 4.5% return in 19 days as long as BAC stays higher than 11. (currently at $11.40).

On Jun 01 08:37 AM WACG wrote:

> I looked at the first two of your "plays" (AAPL & BAC) and they
> are ALREADY losers. The market isn't even open yet. I stopped reading
> after that but have a nice day and thanks for playing!

Jun 01 09:40 AM

[Marco Hickey:]

Sorry for the confusion. I will remember that next time, very good point!


On Jun 01 09:36 AM adelante wrote:

> Good article, but your title is very misleading. It's not "25 Options
> Strategies," but rather "One Optioin Strategy for 25 Stocks for a
> Flat Market." Note: there are only 25 Options Strategies TOTAL.
>
> When I posted your link to our blog on Yahoo, [justcoveredcalls],
> I was corrected-- although I was just posting the link "as is."
> Thanks.

Jun 01 09:40 AM

[User 55758:]

Would be nice if you could explain why you picked these specific stocks to do call writing on. If you just wanted to get max return, start from high vol stocks and do call writing on them. Why this specific set of stocks ?

Jun 01 02:01 PM

[Theta Guy:]

With all due respect Marco, covered calls is a fairly 'vanilla' strategy and only works in a bull market (or bear market rally). With the tremendous rally we've had in the last 3 months, covered calls have been easy money on thousands of stocks.

Your basket of suuggested stocks is leaning heavily to financials and tech.

But what's your plan for the next down leg in this market? Responsible investing in an overheated market requires defensive coverage and the covered calls provide very little protection.

I would suggest that constructing positions closer to delta neutral would be less risky at this juncture.

Jun 01 05:14 PM

[djj420:]

Before I even say anything else, I DEFINITELY do not understand the bond market. But this comment thread seems an appropriate enough place to ask this question:

If FAZ and FAS both underperform their goals of 3x their index because of daily rebalancing, would shorting them both together be an easy way to exploit their inherent weakness?

Jun 02 07:34 PM

[whatanorder!:]

It would have been except that the last 3 mos, since volatility has fallen, they've pretty much tracked their indices. I actually did this & it worked fairly well for awhile.
:-)


On Jun 02 07:34 PM djj420 wrote:

> Before I even say anything else, I DEFINITELY do not understand the
> bond market. But this comment thread seems an appropriate enough
> place to ask this question:
>
> If FAZ and FAS both underperform their goals of 3x their index because
> of daily rebalancing, would shorting them both together be an easy
> way to exploit their inherent weakness?

Jun 23 04:46 PM