The second option requires a bit more time and effort than a 301 redirect. You could do a mini overhaul of the site and turn it into a microsite for your main domain. This option is good for exact-match domains for your targeted keyword, and there are other reasons for going the microsite route that Rand's highlighted in his post about root domains, subdomains, subfolders and microsites. This strategy also works better if the old domain has decent rankings for the keywords you're targeting.
What you really want to do first is scroll down to where it says, referring pages for anchor phrases. All that is is the anchor text distribution to that site. As you can see here this looks like a very natural link profile. Brand name, a product that they had, no text, URL, shopping cart, wireless government. These are the keywords that were related to what that site was about. Okay?
Hi guys, just a thought, you do not need to build traffic to the domain yourself, you can always buy expired domains, best to subscribe to a paid service like dropping.com (so you are the first to know) or a free one, expireddomains.net and in this way, you can get old domains that have traffic. You could use these domains for parking, getting advertising income or even to sell. I have noticed, that domains that were not hot in the past, can still be hot now, just use Google Trends to type in the keyword, and you will see its future projections.
There’s an important distinction to make here between domain flipping and website flipping. The latter mainly refers to buying and selling full websites. By full websites, I mean websites that actually have content and more often than not have traffic and revenue. When buying and selling websites, the domain name matters less as the main value there is the content, traffic, revenue, history/reputation, sustainability and growth opportunities. The same can’t be said for domain names where you’re just selling “the name” and hence it’s all that really matters.