One way to trade a potential market rebound without the risk of buying stocks outright is by using covered calls. A covered call will cap the upside of a stock or index, but provides cash flow and a bit of downside cushion. Recently, a trader placed a 20,000-lot covered call trade using iShares Russell 2000 ETF (IWM). The trade collects a premium while also allowing for over a 10% recovery in small cap stocks by February.
