Playing the Real Estate Game

Specifically, I would look to buy the March $96 calls for about $1.25 per contract and simultaneously sell the same number of contracts for the September $100 calls for around $3 per contract. This creates a diagonal calendar spread for a $1.75 net credit.

The position would benefit from a near-term rise in the share price of IYR. The plan would be take profits on a near-term rally by selling the March calls before their expiration and remain short the September calls on the belief that IYR will not go much above the $102 breakeven point, or about a 10% rise from current levels.

If you want to avoid having a naked short position, you could buy a higher-strike call in the September options to create a vertical spread. This would be a limited-risk bearish position.

Since both the calendar spread and the vertical spread are net credit positions, they would both benefit from time decay -- that is, you could profit even if shares of IYR remain around current levels or even move moderately higher but remain below $100 before the September expiration.