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 call credit spreads position for Mills Corp. (MLS) was selected with a maximum return of +7.5%. In article, “Bearish Trading REITs Returned 7.5%” we selected another bear call credit spreads position for Mills Corp which generated a very nice return of +4.2% in only 57 days.
Competitors:
Competitors for MLS include: Developers Diversified Realty Corp. (DDR), General Growth Properties Inc. (GGP), Simon Property Group Inc. (SPG), Entertainment Properties Trust (EPR), and Macerich Co. (MAC).
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 for options expiration in January of 2007. The results are shown below:
| SmartSearchXL bear call credit spreads search December 22 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Sym |
Stock Price |
Sell Option |
Expire &Strike |
Bid | Buy Option |
Expire &Strike |
Ask | %Return | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MLS | 20.06 (-0.05) | MLSAX | 07 JAN 22.5 (29) | 0.3 | MLSAE | 07 JAN 25.0 (29) | 0.1 | 8.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Analysis:
One attractive bear call credit spreads REIT position was found for MLS, the same REIT stock uncovered in the previous bear call credit spreads analysis, with a potential return of 8.7%, in only 29 days. As long as the price of MLS stock remains below $22.5 at options expiration, the position will be fully profitable.
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[tags]DDR, Developers Diversified Realty Corp., EPR, Entertainment Properties Trust, GGP, General Growth Properties Inc., MAC, Macerich Co., SPG, Simon Property Group Inc., bear call credit spreads, investment strategy, iron condor, option income, poweroptions, selling naked puts, stock option trading, stock options[/tags]