Monday's market plunge -- sending the Dow Jones Industrial Average below 7000 -- has made it ever harder to find profitability the conventional way. My deep-in-the-money call options trading system, which has a win record of 95-1, sidesteps the conventional buy-and-hold strategy. I look for returns through options plays on undervalued stocks that I expect to pay off more quickly.

I get this payoff by setting limit orders $1 above my average call-option contract price. When the contract gets that $1 boost, I cash out. My secret sauce is in the stock picking. Through my Nails on the Numbers newsletter, I issue specific stock picks, strike price and contract prices.

Nails on the Numbers

Market volatility has pushed up contract prices on stock options, making some of them too expensive for my taste. But Monday's down market let us get an options position on Cameron International ( CAM). In a rocky market, positions like this one pay off quickly.

I'm also waiting to close out open positions in Dow Chemical ( DOW), Cisco ( CSCO) and Terex ( TEX), among others. But all of my open positions have at least until January 2010 to meet their targets.

When I pick stocks for options trades, I look for continued profitability at a bargain price. One of the simplest measures of a stock's profitability is its return on equity. This metric can vary widely from company to company. It is expressed as a percentage and boils down to net income divided by total shareholder equity -- or the company's book value.

It's fairly easy to calculate, although you need the shareholder equity figures for both the most recent year and the year prior in order to derive total shareholder equity for a fiscal year.

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