What's Working: Call Options and Closed-End Funds

There's no good reason for it, but I can't help but buy a couple of S&P 500 call options into the weekend. There's nothing good going on, nobody likes this market and all the screams about technical indicators being oversold are usually a sucker's bet for a short-term turnaround.

I know, I've fallen for this one over and over again -- but I just can't resist.

I've taken on some S&P 500 Depository Receipts (SPY - commentary - Cramer's Take) 67 calls for March expiry. They have only 14 days left but we'll be long gone before then, either with the win or the loss. We're so close to the end of expiry that time decay becomes a real fiend in here as buyers.

It's like a guilty pleasure -- a third slice of pizza or a hunk of cheesecake you just know you shouldn't have. At $3.10 a throw, we are limiting our (likely) losses and it'll certainly be a very healthy percentage winner if we catch it right. If you're going to gorge yourself on that pizza, you might as well try to enjoy it.

I'm also centering on two more closed-end funds that have shown sharp discounts going into the weekend: the Eaton Vance Tax Advantaged Dividend Income Fund (EVT - commentary - Cramer's Take) and the Eaton Vance Tax Advantaged Global Dividend Income Fund (ETG - commentary - Cramer's Take). Both are Eaton Vance (EV - commentary - Cramer's Take)dividend capture funds -- the domestic model and the global variant -- and both are at close to historic discount levels near 25%.

It requires a little work, but these are fairly illiquid funds that can sacrifice the discount I'm trying to capture if I get too aggressive in buying them. We need to leave 1,000 share orders in on the downside and wait for them to come to us, and not be unhappy or frustrated if they don't.

I'm not playing this as an outright long play, but more as a discount capture with a hope that on any snapback in the market, we'll get a reduction in that discount. Therefore, I am hedging these almost entirely with index ETFs, which are a close enough approximation of the net asset value of these funds and as good a hedge as I can find. No, really -- the correlation between the two is pretty darn good.

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Know What You Own: Other Eaton Vance ETFs include Eaton Vance Limited Duration Income Fund (EVV - commentary - Cramer's Take), Eaton Vance Tax-Managed Buy-Write Opportunities Fund (ETV - commentary - Cramer's Take) and Eaton Vance Enhanced Equity Income Fund II (EOS - commentary - Cramer's Take). For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.

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At the time of publication, Dicker had call options on SPY and was long EVT and ETG, but positions can change at any time.

Dan Dicker has been a floor trader at the New York Mercantile Exchange with more than 20 years' experience. He is a licensed commodities trade adviser. Dan's recognized energy market expertise includes active trading in crude oil, natural gas, unleaded gasoline and heating oil futures contracts; fundamental analysis including supply and demand statistics (DOE, EIA), CFTC trade reportage, volume and open interest; technical analysis including trend analysis, stochastics, Bollinger Bands, Elliot Wave theory, bar and tick charting and Japanese candlesticks; and trading expertise in outright, intermarket and intramarket spreads and cracks. Dan also designed and supervised the introduction of the new Nymex PJM electricity futures contract, launched in April 2003, which cleared more than 600,000 contracts last year alone. Its launch has been the basis of Nymex's resurgence in the clearing of power market contracts over the last three years. Dan Dicker has appeared as an energy analyst since 2002 with all the major financial news networks. He has lent his expertise in hundreds of live radio and television broadcasts as an analyst of the oil markets on CNBC, Bloomberg US and UK and CNNfn. Dan is the author of many energy articles published in Nymex and other trade journals. Dan obtained a bachelor of arts degrees from the State University of New York at Stony Brook in 1982.