As I look across my diverse portfolio, two stocks have risen to the top: Monsanto (MON) and Autoliv (ALV -0.04%). My two largest personal holdings both represent outsized positions for me, but I'm content to hold because of how I use them in my portfolio. You see, not only am I invested in the fundamental strength of the underlying businesses, but I also compliment my stake with my strategic use of options to enhance and hedge my returns.

Planting the seeds of growth
I've been invested in the growth of Monsanto for several years now; however, I've never actually owned the stock. Instead, through the strategic use of options, I can simulate stock ownership. Even better, I can generate consistent income by writing covered calls to really grow my returns. While that might sound complex, the simple guidance Motley Fool Options provides not only lets me sleep at night with my now outsized position, but I also hardly ever have to think about the overall trade aside from adjusting those covered calls every couple of months.

The key here is being invested in a fundamentally sound business that has a strategic competitive advantage that positions it to grow. In Monsanto's case, its advantage is found in the company's vast intellectual-property portfolio. The company's seeds are engineered with specific traits that enable farmers to produce higher-yielding crops that are resistant to pests and drought. The company's seed technology is a vital piece of the equation to solve the problem of how we're going to feed the world's growing population.

The future looks bright for the company, as less arable land and more hungry people force farmers to look at the best way to increase crop yields. There are other options, with fertilizers such as potash offering one solution. The difference here is a potash producer such as PotashCorp (POT) produces a commodity, and commodity profits are volatile. Monsanto, on the other hand, is in the seed technology business, and intellectual property typically offers better margins and higher profits. That's why I'm content with the growth at Monsanto taking up such a large portion of my portfolio.

Protection from a crash
Automotive-safety specialist Autoliv has also grown to become a large part of my portfolio, again thanks to options. My core strategy here is simple covered calls to generate income in excess of the company's already 3% dividend. In the three years that I've held the stock, I've been able to generate an annual yield of nearly 10% thanks to the additional options income. The covered calls also help to hedge my position if the stock crashes on poor earnings or when the market hits a pothole.

The company makes an array of safety products such as seat belts and air bags and is an important supplier to the likes of Ford (F 0.08%) and General Motors (GM -0.04%). The big positive for Autoliv are that automotive sales are driving back above 15 million on an annual rate, meaning more of its products are going to be needed to keep up with demand. Just last month, Ford saw its sales jump 9% while GM was right behind it at 7%, which is very good news for auto suppliers. 

That should mean steady business for Autoliv for the foreseeable future. However, I don't see the stock, with a low-teens earnings multiple, as being on sale, nor do I view it as expensive. What we have here is a company that provides vital components to the automotive industry that's likely to continue to generate consistent cash flow. This fundamentally sound business makes it a nice portfolio foundation, and I think it will grow steadily over the long term. However, for me the real story here is banking the dividend and speeding up the returns via options income.

My Foolish take
I have no problem holding large positions in both companies because I view them as strategic positions to be used to generate income. Both are solid long-term holdings, though I'd probably not hold them in such large quantities if I didn't use options alongside to enhance my returns. So while Monsanto and Autoliv are my top two stock holdings, they might not be the best two holdings for you. You might be better off taking a look at what our co-founder Tom Gardner is holding as he recently revealed his top two stocks as well. For the names of that surprising pair of companies, just click here.