In a previous article, “Bearish Trading & REITs“, we outlined a bear call credit spreads strategy for Real Estate Investment Trusts (REITs). In the article, a bear credit call spreads position for MLS was selected with a maximum return of 7.5%. Since MLS remained below the short call strike price of $17.5, the position was fully profitable.
The 7.5% was realized over a holding time of 19 days. Since we don’t see any improvement in the real-estate market anytime soon, we’ll revisit the REIT bear call credit spreads strategy one more time.
Using PowerOptions stock options search engine SmartSearchXL, we searched for bear call credit spreads stock options for REITs on October 20, 2006 with a probability of success greater than 75%, no earnings report between now and options expiration and with all options expiring on December 17, 2006.
The results are shown below:
| SmartSearchXL Bear Call Credit Spreads Search October 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Sym |
Stock Price 10/2/2006 |
Sell Option |
Expire &Strike |
Bid | Buy Option |
Expire &Strike |
Ask | %Return | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MLS | 17.35 (unch.) | MLSLX | 06 DEC 22.5 (57) | 0.4 | MLSLE | 06 DEC 25.0 (57) | 0.3 | 4.2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Analysis
One REIT was found, MLS, the same REIT stock uncovered in the previous analysis with a potential return of 4.2% as long as the price of MLS stock remains below $22.5. With upside resistance at the $20 level this position would have very nice upside protection. It would take almost a 30% move in this stock for the position to get in jeopardy.
PowerOptions provides a free 14-day trial of its service. So join PowerOptions today, and you too can start reaping the benefits of the REIT 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 stock options positions.
[tags] bear call credit spreads, investment strategy, option income, poweroptions, stock options [/tags]