A Pair Of Options Plays Betting On The Bounce

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

Those of you who trade our option recommendations know that we have exited most of our option positions over the past few weeks — most notably scoring a triplet of 100% gains on July 13 and a second triplet of 50%+ gains on July 31.

Prior to the recent market wobbles, years of low volatility and steady gains had lulled investors into a false sense of security. Yet for all of the hand wringing, the current market turmoil does not even qualify as a "correction" — technically defined as a drop of 10% in the U.S. markets. Things feel so bad simply because things have been so good for so long. Want proof? I bet it doesn’t feel like both the S&P 500 and NASDAQ finished up about 1% last week.

Here’s why I think this week’s recommended options plays could be among the quickest double- and even triple-digit percentage profits we clock in Global Bull Market Alert this year.

First, the sudden jump in volatility is one of the most powerful contrary indicators and most powerful "buy" signals around for speculators. In addition, a number of widely followed technical indicators — stochastics, MACD, Fibonacci levels — all indicate that the market is oversold and has hit or is nearing a technical support level.

Second, volatility is terrific for options. The more volatile the market, the quicker and faster you can earn profits. As a general rule, (bullish) call options also tend to be relatively underpriced compared to (bearish) put options in times of market uncertainty.

Finally, it’s no secret that global stocks tend to be more volatile than their domestic counterparts. While the ride down is steeper, so is the ride up. That means that when the market does recover, double-digit percentage gains in stocks can quickly translate to triple-digit percentage gains in options.

With that in mind, here are this week’s Global Bull Market Alert options recommendations:

Buy Brazilian commodity giant Companhia Vale do Rio Doce’s (CVRD’s) December $45 call options (RIOLI.X).

Buy Korean steel giant Posco’s November $135 call options (PKXKG.X)

These two also have the benefit of trading in two of the top-performing markets so far this year.

Again, both of these are highly speculative plays. I don’t expect to hold on to these investments for long, since they are relatively short-dated options. But if the market heads in the direction that I anticipate, we should be able to lock in some nice gains.


Mr. Market’s Moodswings meant that we were stopped out of Terex Corp. (TEX) stock at a loss. But let’s remember that we have already booked gains of 102% and 56% on the options. As an aside, Terex’s COO purchased $900K of Terex stock on August 3 — a sure sign of his confidence in the company’s long-term prospects.

Attend FREE and hear me along with 50+ financial, economic, and, political experts during Sept. 6-8 at The Money Show in Washington, D.C. Whether you are an experienced investor or just developing your financial edge, you will discover effective strategies relating to investing, the economy, and your money! Visit the state-of-the-art exhibit hall featuring 125+ companies showcasing the best financial products and services on the market. Call 800.970.4355 or visit: The Money Show Washington D.C.’s website to register FREE today! (Don’t forget to mention Global Bull Market Alert and priority code #007384)

Like This Article?
Now Get Our FREE Special Report:
Alternative Investing: Investing in Timber

Stock Investor editor Paul Dykewicz reveals why investing in timber may be one of the best long-term portfolio strategies you'll find today.

Get Access to the Report, 100% FREE

previous article

Mr. Market continues to grapple with his mood swings on the back of nervousness about subprime woes. As bad as current sentiment seems, the sell off in the S&P 500 just about matches the selloff in May of 2006. And emerging markets -- which sold off 26% during that correction -- actually have held up much better this time around to drop only 10.5%. This bodes well for a strong recovery.


Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

  • Forecasts & Strategies
  • Home Run Trader
  • Fast Money Alert
  • Five Star Trader
  • TNT Trader

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

  • Cash Machine
  • Premium Income (exclusively for subscribers of Cash Machine)
  • Quick Income Trader
  • Breakout Profits Alert
  • Hi-Tech Trader

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

  • Successful Investing
  • Intelligence Report
  • Bullseye Stock Trader

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

  • Retirement Watch
  • Retirement Watch Spotlight Series
  • Lifetime Retirement Protection Program

Jon Johnson

Jon Johnson's philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. For the past 21 years, Jon has helped thousands of clients gain success in the financial markets through his newsletters and education services:

Product Details

  • Investment House Daily
  • Technical Traders Alert
  • Success Trading Group


Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

  • Dividend Investor