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The United States and other world economies are in recovery mode, and, boy, does it feel good to say that. But that doesn’t mean that all stocks, regardless of their fundamentals or market segment, will continue to trade higher in an indiscriminate market rally. No, you need to pick and choose your recovery investments wisely.

Rather than trying to select which of the thousands of publicly traded companies will come out on top, why not take the easier route and play the sectors that will benefit most though exchange-traded funds (ETFs)? Better yet, why not supercharge your returns by trading options on these ETFs? Using that strategy, you mitigate some of the risk associated with trading a single stock, while increasing your leverage through options. Sounds like a pretty good deal to us.

Keep reading to see which ETFs and options we recommended to have you profiting from the global economic recovery.

Next: Market Vectors Steel ETF (SLX)

By Chris Johnson and Jon Lewis

One gauge of an economy coming out of a recession is expanding industrial activity. Recent numbers from around the world show that this expansion is indeed under way. Industrial output in the United States is up at a 7.8% rate in the first quarter, while capacity utilization is at its highest level since November 2008. And eurozone industrial production is sitting at a two-year high.

One way to play this trend is to stick with basic materials. And one of the most basic is steel, which you can trade with Market Vectors Steel ETF (). Steel and iron ore prices are on the rise, which is one of the reasons SLX more than doubled the performance of the &P 500 () in the first quarter.

With a solid fundamental foundation, the steel sector should continue to prosper as the recovery matures over the next several months. Jump on board the sector now with a longer-term option. You can buy the SLX Sept 70 Calls () for around five bucks. A continuation of the current trend should allow you to double your money by .

Next: SPDR S&P Homebuilders (XHB)

By Sam Collins

Between now and year-end, the market should rebound from any interim correction, and some groups will benefit more than others from a recovering economy and government support. One of those groups is the homebuilders.

The SPDR S&P Homebuilders () seeks to replicate, net of expenses, the S&P Homebuilders Select Industry Index, and invests at least 80% of assets in securities that comprise the index. The index represents the homebuilding sub-industry portion of the S&P Total Market Index (TMI). Although XHB’s holdings are scattered, it is fair to say that its portfolio is still highly leveraged to the domestic housing industry (over the trailing three years, XHB has shown a 98% correlation).

Many shareholders probably appreciate XHB’s relatively light homebuilder exposure, which has provided less volatility than other homebuilder ETF because of its diversification. The top five investments include Aaron’s Inc. (), Bed Bath & Beyond (), Lennar Corp. (), Masco Corp. () and Owens-Corning ().

I recommend buying the XHB Dec 18 Calls () .

Next: iShares MSCI Australia Index Fund (EWA)

By Nick Atkeson and Andrew Houghton

During the worst of the recession in the United States, we flew to Australia to see how the other half was doing. What we discovered is that our economic slowdown and financial market collapse had not had much impact on the Australian economy. Australian real estate and consumer spending stayed strong, and it was the first country to begin to raise interest rates coming out of the crisis.

The secret to Australia’s success is that they manage their economy very carefully and they sell lots of raw materials to the developing economies of Asia, particularly China. So buying Australia is a way to gain exposure to Asian economic growth with higher accounting standards and less volatility.

Analysts are starting to raise there 2010 real GDP forecasts for China again. The most recent forecasts show growth of 10.6% rather than about 9%. As the year unfolds, we believe the materials sector will continue to advance as a result of the demand-pull from China’s better-than-expected growth. Again, materials is what Australia sells.

Year-to-date, the iShares MSCI Australia Index Fund () has advanced in-line with the S&P 500 (). As China’s growth trajectory accelerates, we expect EWA to outperform, so we recommend buying the EWA October at-the-money calls.

Next: SPDR S&P Retail (XRT)

By Chris Johnson and Jon Lewis

Few sectors have been hotter than retail of late. Take any number you want — government retail data, same-store sales, weekly sales numbers, etc., etc. — and they all say the same thing: The consumer is spending again. You want proof? Just look at the SPDR S&P Retail (), which is up more than 25% off its early February low. In fact, this ETF is flirting with highs last seen in September 2007.

Our research partner, ChangeWave Research, expects an “explosive move upward” in consumer spending in the near term, with the biggest gains coming in household repairs, vacations, restaurants and electronics. And why not? After hunkering down for so long as the economy sank under the weight of housing and financial pressures, you know consumers are just itching to spend again.

Because we’re in the midst of the consumer rally, we don’t need to buy much time with an option to capture a strong move in XRT. Let’s go out a couple of months by playing the XRT June 43 Calls ().

Next: iShares Dow Jones U.S. Healthcare Sector Index Fund (IYH)

By Sam Collins

Health care stocks are another group that should benefit from a recovering economy and government support between now and the end of the year.

The iShares Dow Jones U.S. Healthcare Sector Index Fund () seeks results that track the Dow Jones U.S. Health Care Index. The fund generally invests at least 90% of assets in securities of the underlying index and depositary receipts representing securities of the underlying index.

The top five holdings are Abbott Laboratories (), Amgen (), Baxter International (), Bristol-Myers Squibb () and Gilead Sciences ().

I recommend buying the IYH Oct 65 Calls () below $3.50.

Next: SPDR KBW Regional Banking (KRE)

By Nick Atkeson and Andrew Houghton

Banks have gone from bankrupt to solvent in the past 18 months. With the yield curve being very steep, net interest margin income is coming in at a record pace. The rally in the financials has been powerful.

There is no question that much of the collateral behind many bank loans continues to be distressed. Many businesses are still suffering and the real estate market has yet to show sustained improvement. This explains why SPDR KBW Regional Banking () is trading at half of where it was at the start of 2008.

We expect further economic improvement over the next year, and that means regional banks will benefit. Additionally, they will play catch-up with the advance that has already taken place in the major banks.

We recommend buying the KRE Jan 2012 35 Calls (). By buying the January 2012 LEAP, we are allowing plenty of time for further recovery to unfold. By buying the $35 strike, we are leaving plenty of room for upside as KRE was trading at about $50 at its peak and was $40 just 24 months ago.

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