Times are tough – no doubt about that.

But amid the doom and gloom, we continue to stress that there are various ways to negotiate brutal bear markets – ways that can still bring in strong profits.

We’ve demonstrated that in recent weeks, due in no small part to our covered call strategy.

Now, I understand that using options strategies of any kind are sometimes hard for investors to wrap their minds around, much less actually use. They seem complicated, especially since most people are used to just buying and selling stocks.

But there’s the rub…

Bypass The Wall Street Money-Grubbers With These Two Key Things

Sometimes, the devious types on Wall Street like to keep you in the dark on purpose. Most brokers don’t want to teach you about hedging your bets… they just want you to make them and grab your money.

In some cases, I’ll be the first person to admit that hedging your bets is a flat-out bad idea. However, this is not one of those cases, since this type of market, complete with its daily volatility and blow-ups, requires that you expand your investing acumen.

Which is where we come in, giving you the two key elements you need…

1. The necessary know-how.
2. The specific trades to take end-game profits.

Buyers vs. Sellers… Who Wins?

Using options does not mean gambling. If you’re relatively new to the options world, that’s the first fallacy you need to put aside. Options actually work very logically. With every buyer, there’s a seller.

The Buyers: 9 times out of 10 – especially with short-term options trading – buyers lose out. And with good reason: It’s like trying to predict where a stock will go in a couple of weeks or months, something that nobody is entirely capable of doing.

The Sellers: Options sellers, on the other hand, usually make money because they’re basically betting on their lack of supreme knowledge and control. However, while they acknowledge their limitations, they want to get paid while waiting around. In particular, in the case of put-selling or deep-in-the-money covered call writing, they want to own the underlying shares, but at a price that they specify.

For example, take our play on Goldcorp (NYSE: GG)…

A Golden Trade

We liked gold when no one else did, so we bought the shares. But we were also aware that gold prices would likely remain volatile for a time, keeping shares from reaching our targets right away.

So what to do?

Easy. We bought the shares and sold call options against our position. This not only reduced our cost, but also gave us a quasi-dividend and increased our chances of a win.

In the end, we didn’t get called away – and even got another opportunity to increase our potential for a win. We didn’t get called away and got another opportunity to sell more calls, which put us in the catbird seat in terms of cost.

We did the same with our recent Electronic Arts (Nasdaq: ERTS) trade in the Xcelerated Profits Report. In this market, it’s how you play the game that counts. It’s all about risk management.

Smart Investors Use This Free Resource

If you’re serious about investing, we have the resources for you to learn about these strategies… at your fingertips and free of charge.

Just visit the Smart Profits Report and scan through our archives. We provide step-by-step instructions on how to execute various trades, as well as the rationale behind them.

While browsing, if you find something you really like, spread the wealth with your friends and have them sign up for this completely free resource.

Now over to Marc, who has some interesting market insights…

A Brave New (And Volatile) World

To say the least, I’ve had some interesting conversations with my institutional contacts recently…

Several months ago, most of them were sitting on the sidelines, trying to figure out just how to play this new volatile market forced on us. Even these guys were confused and bewildered, unwilling to take risks. They just wanted to gain some understanding of what the heck was going on.

Today though, institutional investors appear to have rediscovered their courage. To some extent, at least, they’re back in the game, having seemingly accepted the current environment as the new reality. They’re going back to work and trying to make money for their clients.

Of course, that doesn’t mean making money now is any easier than it was a few months ago. But time served trading these crazy markets has led to a sense of familiarity.

The Way Ahead

This new approach could be positive for the markets, as portfolio managers get back to the business of buying and selling various instruments. And hopefully, the credit markets will thaw, which would be an instrumental step in stabilizing the markets in general.

Don’t get me wrong: Business is not as usual. It wouldn’t take too much of a financial or political setback to send investors of all stripes scurrying back underneath their rocks. But this new resignation that things will be tough for a while longer seems to be bringing some more activity back to the markets.

In fact, I wouldn’t be surprised if this helps fuel a significant bear market rally in the coming months – one in which we’ll naturally be well-positioned to maximize our gains.

So keep your eyes open… I suspect when the buying starts, it will be fast and furious. Have some capital ready to deploy and be ready to act quickly. I’m looking forward to a very interesting spring.

Tech Talk – Ticker Of The Week

How’s this for a pleasant change? Most of the bank stocks have had a pretty good week.

However, comments from the Obama administration about the future of the healthcare sector and a provision that would make the government the sole provider of federally backed loans to students kept the broader stock indexes from following suit.

For example, SLM Corp. (NYSE: SLM) dropped over 30% on Thursday because the government thinks it can do a better job at managing student loans than the private sector. This has many businesses – including the healthcare sector – on edge, unsure of what businesses the government will put its mitts on next.

The Feds already own a big piece of Citigroup (NYSE: C), with more big banks in danger of undergoing a similar fate.

One bank stock on my radar recently is SunTrust Banks Inc. (NYSE: STI). The stock traded as low as $6 just a week ago, but has rallied more than 100% since then before pulling back again today. Check out the chart below…

The stock has short-term support around the $10 level, but with no real details being released on how the rest of the banking situation will be handled, they could still be very risky investments.

The top of a long-term regression line comes in around $15 and a close or two above $15, especially on heavier volume, should lead to higher prices.

That’s all for this week.

Karim Rahemtulla

Top 5 Recent Closed Positions – Mt. Vernon Research Trading Services

COMPANY	SYMBOL	BUY DATE	SELL DATE	GAIN	SERVICE
May 2009 Silver Futures	$11/$11.25 (call option spread)	12/18/2008	2/6/2009	50%	Triple-Zone Profit Trader
SIGA Technologies	SIGA	10/16/2008	1/30/2009 (first half)	66%	Access
Tenet Healthcare	YTX-AA (January 2010 $5 calls) ONZ-AU (January 2009 $7.50 calls) – calendar spread	10/8/2007 12/3/2007	1/20/2009	100%	400 Report
Whirlpool (February 2009 $45 calls)	WHR-BI	12/31/2008	1/6/2009 (second half)	161%	1-2-3 Trader
Whirlpool (February 2009 $45 calls)	WHR-BI	12/31/2008	1/5/2009 (first half)	73%	1-2-3 Trader

Top 5 Recent Closed Positions – Xcelerated Profits Report

COMPANY	SYMBOL	BUY DATE	SELL DATE	GAIN
Tesoro	TSO	11/24/2008	2/17/2009	108%
The Gap Inc	GPS-OU (put-sell)	11/24/2008	1/5/2009	23%
VMware	MKT-MG (bought puts)	8/22/2008	10/29/2008	83%
iShares China 25	VHF-MR (bear spread)	6/25/2007	9/15/2008	50%
December 2008 Gold Futures	$930/$950 (bull call spread)	5/23/2008	7/15/2008	36.9%