The Dow Jones Industrial Average has been flirting with all-time record highs the last several days. In this situation, a bear call credit spreads stock options position may be a good strategy to consider.
Stocks and in particular stock indexes have difficulty many times breaking through previous record resistance levels. A major reason for this phenomenon is a result of stock traders using previous resistance levels as a signal to exit a position for profit taking, putting pressure on the stock or stock index to remain stagnant or fall.
We will consider taking a bear call credit spreads stock option position for $DJX. Using PowerOptions SmartSearchXL search engine, we find a $DJX bear call spread options position available with a probability of success of 84.2% and a potential return of 5.3% (22 days).
| SmartSearchXL for 9/29/2006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Sym |
Stock Price |
Sell Option |
Expire/Strike | Bid | Buy Option |
Expire/Strike | Ask | %Ret | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $DJX | 117.11 (-0.07) | DJWJP | 06 OCT 120.0 (22) | 0.15 | DJWJR | 06 OCT 122.0 (22) | 0.05 | 5.30 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As long as the $DJX is below 120 at options expiration on October 20, 2006, this position will return 5.3%, not bad for holding a position for only 22 days.
PowerOptions provides a free 14-day trial of its service. So join PowerOptions today, and you too can start reaping the benefits of the Dow Jones Industrial Average bear call credit spreads investment strategy.
PowerOptions provides Internet based tools for analyzing stock options with specific search criteria and for finding potentially lucrative option income. For those seeking to execute a bear call credit spreads investment strategy for their personal portfolios, PowerOptions provides an Internet based search engine for finding potentially lucrative income producing bear call credit spreads options positions.
[tags]stock options, bear call credit spreads, investment strategy, option income[/tags]