There was a dust-kicking, bull stampede in stocks nearly across the board that began in mid March that continued until the end of April. Then the calendar turned to May, and that’s when the bulls began to tire. Since the beginning of the month, major averages such as the Dow Industrials and the S&P 500 are down about 2%. The tech-heavy NASDAQ 100 is off about 1%, while the small-cap Russell 2000 is down over 3%.
Now, there’s been a lot of debate about the future direction for stocks. Some argue that the bull’s recent run is over, and that we will see more selling in May that continues through the traditionally slow summer months. Others think the recent pullback in equities just represents a breather for the bulls.
Of course, only time will reveal which camp is correct, but if you count yourself as part of the continued bull crowd, then a good way to put your money where your thoughts are is via “ultra” funds and the call options pegged to their bullish future.
Ultra funds are exchange-traded funds (ETFs) issued by ProShares Advisors that are pegged to specific stock indices such as the aforementioned Dow, S&P 500, NASDAQ 100 and Russell 2000, among many others. These funds are designed to deliver twice the performance of their underlying index.
So, if an index is up 2%, then its respective ultra fund should be up 4%. Now that also means that when the index is down 2%, the ultra fund should be down 4%. So these funds can be like riding a bull and are not for the faint of heart.
Ultra ETFs are designed for aggressive traders who like the fast-moving action of a two-beta fund. That action heats up even more when you’re talking about adding bullish call options into the mix. If you’re an ultra-aggressive trader, then ultra ETF options offer a great way to make money very quickly. Of course, the flipside is that you could lose money in these options very quickly as well. But if you’re intrepid enough to venture into ultra ETF option territory, then your courage just might pay off big time. Here are four trades for the fierce-of-heart bullish options player.
ProShares Ultra Dow 30 Fund
The ProShares Ultra Dow 30 Fund (NYSE: DDM) is a two-beta, leveraged ETF pegged to the Dow Jones Industrial Average. The recent decline in this fund down below $65 makes the DDM Jun 69 Call an aggressively bullish bet on the widely followed index.
ProShares Ultra S&P 500 Fund
The ProShares Ultra S&P 500 Fund (NYSE: SSO) is the leveraged bet on the broad-based S&P 500 index. The fund sank to nearly $54 on Friday, May 13, but if a rebound in the index does take place we’re likely to see SSO break back above $56. That makes the SSO Jun 56 Call an intrepid bet on the return of the broad-based bull.
Click through for two more Ultra-bullish option trades.