My deep-in-the-money options trading system has had a good week. Bets on some of the companies I follow paid off.This week, I've had wins on Alcoa ( AA), Halliburton ( HAL) and Intel ( INTC). These wins bring the record for my Nails on the Numbers newsletter to 102-1 since TheStreet.com began publishing it about a year ago. And these wins bring my total so far this calendar year to 10. My win total just for this week is $10,150. Granted, that's an atypical week, and Intel had been out there 218 days. But with nine positions still open, more wins are on the way. Throughout my baseball career, I put my heart and soul into the game so that I would be a winning player. I wouldn't accept any less of myself, and even now I put everything I've got into what I'm doing. I go full speed all the time. More than anything, I tried to be smart by knowing my opponents and knowing the game inside and out. To succeed, you have to know the ground rules and then try to get every possible advantage within those rules. A lot of those advantages can come from simply doing your homework. In past columns, I talked about the benefits of picking DITM option calls and how they give you exposure to the best stocks at a fraction of their trading prices. My process is simple. I keep my eye on a universe of stocks, usually 100 or so that I follow closely. This includes companies from all different sectors. But in a market like this, I'm looking at specific industries that I believe will do well over the coming year. In recent months, those industries include oil-related services, specialized manufacturing and high tech.
I try to pick companies with good, solid fundamentals. I look for solid historical and expected returns, good cash flow and low debt levels. When I find a new stock that fits my criteria, I add it to my list and make it a pick when I believe the market has undervalued it. In recent months, I've followed stocks like General Dynamics ( GD), Foster Wheeler ( FWLT), Occidental Petroleum ( OXY) and Transocean ( RIG). A stock becomes a pick based on its technical trends -- such as its moving averages. I watch these to see what direction it's headed. I also watch market trends for news that will impact that stock's industry and its performance. I also watch for Wall Street operators to make a mistake and undervalue the stock. These are the strategies that enable me to pick good stocks that will turn hot at some point, enabling me to cash out. In the end, they pay off. And some weeks, those payoffs hit the ball out of the park.