Don't spend time beating on a wall, hoping to transform it into a door.

--Dr. Laura Schlessinger

Well we are fast approaching the 2012 "Half-Way" mark and it's a good time to assess where we are and where we're heading.

The "What Me Worry" strategy put forth in January has returned just shy of 12% YTD. It trailed the broad S+P market by a few percent when the S+P was at its top, but, as predicted, has outperformed by a considerable margin since.

Those who regularly read my articles know that my first step in planning is to develop a thesis. Once I've come to grips with the thesis I then look for a complimentary strategy.

So, here's how I see the remainder of 2012. The SYSTEM IS BROKEN. Europe is a train wreck, U.S. Politics is a fiasco, smart money (J.P. Morgan) can be "gamed" out of multi-billions and Hi-Frequency Traders and Hedge Funds move the market. The bright spots seem to be hope that COMMUNIST China can effectively manage its capital markets or we get bigger injections of narcotic monetary stimulus. Combining all this means we are likely to be in a trading range on the S+P of plus/minus 120 points from here. That is up to $1450 and down to $1200.

For the retail investor, the typical SA reader, if you will, this is problematic. For the options investor, opportunity abounds.

Let's bring out one of my favorite strategies: The Ratio Call Spread.

This consists of two parts...

- Buy a December 2012 ATM call on the SPDR S+P 500 ETF (NYSEARCA:SPY) with a strike of $133 for a debit of $7.19.
- Sell TWICE as many December 2012 OTM calls on SPY with a strike of $140. This credits $3.52 each, for a total credit of $7.04.This results in a net debit for both legs of only 15 cents per contract.

I will buy as many calls so that the total exposure equals my portfolio. That is, if I have a portfolio of $250,000, I will buy about 18 calls and sell 36 calls.

So, what happens.....

If the market stays flat or goes down I lose 15 cents times 18 contracts or $270. No risk here.

If SPY moves up toward $140, I make the whole move by virtue of the 18 calls. By matching the number of calls with my portfolio value (and assuming my portfolio performance mimics SPY) I DOUBLE my portfolio return.

If SPY moves above $140, I start to give back on the 36 calls I sold. But, since the 18 calls I bought still gain, I am "net short" just 18 calls, or the theoretical amount of my portfolio.

Now, since the total gain on the way to SPY=$140 is $7 ($140 minus $133 strike), SPY would have to move to $147, before the "give back" cancels out the $7 gain.

If SPY moves above $147, the strategy shows losses equal to the excess over SPY=$147. Of course, these aren't really "overall" losses, it just caps my theoretical portfolio return at SPY=$147.

Since this is 10% up from here, and given my thesis, I'm happy to take the 10% up-move-cap.

So, what have I gained by implementing this strategy? Simple, no downside loss (placating my pessimism), double my returns on a mild up market by capping my gains at 10% (placating the optimist). Works for me.

Now, for the more pessimistic... the ratio PUT spread.

- Buy one December 2012 ATM put on SPY with a strike of $133 for a debit of $ 8.21.
- Sell TWICE as many December OTM puts with a strike of $120. Each credits $4.10 for a total credit of $8.20. Net cost of both legs is one cent.

I wont detail it fully, leaving that to the reader, but the gain is dollar-for-dollar down to SPY= $120 (10% drop). Then there is a give back to the break even at SPY=$107. Thereafter losses occur.

Be especially mindful that any give back below the break-even of SPY=$107 will effectively DOUBLE your theoretical portfolio losses. In this regard, extreme caution is warranted and it is not for the faint of heart. Those who are concerned about the precipitous drop below SPY=$107 should look toward my 100% portfolio protection strategies in previous articles. Then, it would be advisable to take on the added risk of the ratio put.

Conclusion: My thesis for the next six months concludes with the likelihood of the market trading no more than plus/minus 10%. Some might even tighten that up to plus/minus 5%. Until and unless the macro issue resolve themselves, I'll stick to my guns.

Instead of "banging on the wall" of the situation we're in, I'll look to options strategies to find a door that I can walk through. The ratio option spread seems to fit just fine.

**Disclosure: **I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

**Additional disclosure:** I buy and sell options on SPY