3/25/2014

My favorite strategy I used when trading for a hedge fund was using call options to replace buying a stock. On large blue chip companies, you can find options that are extremely cheap and which move almost one for one with the underlying stock.

These options are deep in the money call options (usually with a delta above .80) and with an expiration that is less than one month out.

Right now Darden Restaurants (DRI) looks like an attractive stock to trade using my stock replacement strategy. If I wanted to buy 1000 shares of Darden it would cost me almost $51,000. But if I use my secret stock replacement strategy instead I can buy 1000 shares of Darden for just $3900.

The April Darden $47 Call Options trade for just $3.90, and with the stock priced at $50.71 that means these call options will move almost 1 for 1 with the underlying stock. Better yet I am paying only 19 cents (the options premium) to control 1000 shares of a blue chip company.

Even better if Darden hits $55 anytime over the next month I will make more than a 100% return on my money in less than a month.

Where else but the options market can you legally make a 100% plus return in less than a month on just a $4 stock move?

This is the power of the stock replacement strategy the ability to make a 100% plus return in less than a month and you wonder how people become Billionaires

Will Meade
President of The Billionaires Portfolio