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Dykstra: Hunt for Bargains

Lenny Dykstra

The name of the game is getting back more value than you give up. When I look to make a trade, I will accept nothing less. It a basic theory that may come as no surprise to seasoned market veterans, but is worth reiterating because a lot of newcomers can be intimidated and lose sight of the basics.

If I am spending real money, I want some sort of advantage that will increase my chances of winning. By buying deep-in-the-money calls, my advantage is that I am getting exposure to the world's best companies at a fraction of the cost of the common stock.

In baseball, finding value in trades and players is a difficult and extremely important task that requires a ton of homework and judgment. Meanwhile, the Phillies and Rays are locked in a holding pattern after rain stopped Game 5 of the World Series last night in the sixth inning with the score tied 2-2.

Today, I will avoid deconstructing the impact of this turn of events. We will find out soon enough as the teams finish the remaining innings tomorrow. A win, and the Phillies are world champions. A loss and the Rays stay alive and are one step closer to climbing out of the 3-to-1 hole they have put themselves in.

However, helping the Phils get to within one victory of the crown has been finding value in new players and then finding a way to add them to their roster. Two great examples are Brad Lidge and Jayson Werth. Everyone knows about Chase Utley, Ryan Howard and Jimmy Rollins. They have also heard about the rise of Cole Hamels at the front of the rotation.

However, Pat Gillick made a few great transactions the last two years that haven't received nearly as much fanfare but have resulted in greatly improved the team.

The first move I want to talk about is the Jayson Werth signing in 2006. Gillick saw a former first-round pick down on his luck and hampered by wrist injuries. A great talent, Werth was finally healthy this season, and Gillick's shrewd decision has paid off.

The second deal that is an important part of the Phillies' season is the trade for closer Brad Lidge. Lidge was nearly unhittable as a pitcher for the Astros a few years ago. Gillick saw a player with amazing skills who was not playing at his potential and was therefore being severely undervalued by his team's front office. The trade looks really good now for the Phils. Lidge hasn't blow a save all year.

The deals made for these players are something I greatly admire because I look for the same opportunities with my picks. I look at companies that have been undervalued and unfairly beaten down by the market. I am able to then trade stock for a company at a great discount while still getting solid results.

The point is that I look to trade stocks at a discount while still getting great results. Some recent pickups that have already paid off include United Technologies(UTX Quote), my Oct. 22 pick. It filled and sold the very next day for a quick $1,000 win. I bought United Technologies calls at $12 while the stock was trading around $48, paying about one-quarter of the price.

I had my order filled with Parker Hannifin(PH Quote) at $7.50 while the stock traded at $38. It was my Oct. 20 pick and has already crossed the finish line for a $1,000 victory. Halliburton(HAL Quote) is another example as I bought my options at $8.70 when the stock was at $18. Again, it filled and sold on the same day (Oct. 17) for a quick $1,000 win.

Let's go down the line. Even though Microsoft(MSFT Quote) traded at $25, I was able to purchase contracts at $6.70, a huge discount. My pick on Oct. 8, Microsoft brought home a $1,000 win in just three days.

I bought Cisco(CSCO Quote) at $8.20 while its stock traded at $17. On Oct. 10, it filled and sold for a $1,000 win. Texas Instruments(TXN Quote), Deere(DE Quote), Chesapeake(CHK Quote), The Shaw Group(SHG Quote) and Caterpillar(CAT Quote) are some of the other recent bargains I found that have turned into wins.

A keen sense for bargains and winners has helped Gillick's Phillies get to the World Series. For me, it has helped me to go 80-0 and earn more than $200,000 in wins since I began Nails on the Numbers in March.

Lenny Dysktra manages Nails on the Numbers, a subscription service sold by TheStreet.com. He is 80-0 this season on his options picks. Dykstra writes regularly about options trades for TheStreet.com.