Obviously I"m pretty biased on the stock vs option front. I think the best return I ever had trading stocks was 12% in a year followed by a couple of losing years. My option returns are in the 20+% per year so obviously I'd say ditch the stocks and learn to trade options. I wouldn't bother with the covered calls because the margin requirements with your limited funds won't give you the return you are looking for.
I've actually switched to trading strictly index and ETF options only. I prefer more trend following and Tech analysis to base my trading decisions so the index and ETFs are nice cause I don't have to waste my time on learning about each individual stock and worrying about waking up to a stock option backdating scandal or a run on the bank type of situation, and instead concentrate more on a sector as a whole.
Unfortunately with your small start up amount you'll be pretty limited to just simple strategies on the long side (i.e. buying calls and puts, debit spreads, calandars, stuff like that). If you're lucky you can buy 10 debit vertical spreads for $300 ($30 each) and if the market moves in your favor it can easily go from $30 to $40 so you've made $100 profit on your $300. This is not unreasonable in the options market, the problem is that the opposite is also true. You can just as easily lose that $100....but if you spend a lot of time studying the markets (spy, iwm are a couple great ETFs to trade options on) you can definitely make decent coin.
Again this is coming from someone that had no luck trading stocks so I'm sure others on here can give you better suggestions if you want to trade stocks. Finally, definitely do a lot of reading up on options and watching the spy and iwm markets and paper trade them to see when you would get in and get out and learn position sizing and loss management.
