Playing with the ProShares Ultra S&P500 (ETF) (NYSE:SSO) Options has become a National Pastime for many investors looking to play the broad market swings.  A simple excercise in selling covered calls and knowing when to execute them can keep you afloat and do what I like to call 'charge rent' on the shares I own.  Using stock options to protect your investment is a tool every trader should know and use in 2009.

What the hell is the SSO?  ProShares Ultra S&P500 (ETF) (NYSE:SSO) seeks daily investment results, before fees and expenses, which correspond to twice the daily performance of the S&P 500 index. The fund normally invests 80% of assets in financial instruments with economic characteristics that should be twice the return of the index.

The following are my stock /option holdings and transactions in my account.  Bear with me, it is a bit difficult to follow but believe me it is worth learning.  First up a quick and free way to watch the pricing and activity for calls and puts on the SSO can be found at Yahoo Finance - Click to Access.

Since I own 500 shares, my cost basis is $11,322/500 shares = $22.64/share

I am obligated to sell 300 shares at $22.00 on September's expiration Friday (9/18/09) because I sold the SOJIV Sept. $22 Call

The remaining 200 shares I hold at the current closing price of $23.88 on 7/7/09.

So, assuming the current price of $23.88 remains through September 18, my account value would be 300 shares * $22/share + 200 shares * $23.88/share = $11,376.  This puts me slightly ahead of my cost, which is not too bad considering SSO has tumbled $2.38/share (-9%) in a mere 8 days.

Stay tuned, more to come.  If SSO keeps tumbling, we will implement additional strategies to mitigate for the losses!

Follow our news and trades at the AWD Investing Blog, thanks for reading.

Looking for Investing Ideas that require less risk?  Don't miss these articles:
Taking Advantage of High Yield Savings Accounts

Investing using High Yield CDs - 3, 6, or 9 Months in 2009