Get Rich - Stay Rich - Investing for Monthly Income

Selling PUTs for High Return Monthly Income

I have created an investment that achieves higher monthly returns while managing stock risks in the trade. You may be skeptical of this concept and should be when you hear something like this introduced into your trading plan. To explain, let’s look at what must happen to a stock price for a successful PUT selling trade. To keep the premium from the PUT sell, the stock price must be above the PUT option strike price at expiration. To increase my percent of winning PUT trades, I invest in stocks with price momentum moving higher. This increases the probability of the stock price closing above the strike price – giving us more winning trades.

How do I identify these winning trades? I combine the fundamentals of a stock with its price performance on its stock chart. I find securities that have a positive change in price that creates upward price momentum. You may have heard about price breakouts and other upward biased chart patterns. This introduces a concept of technical analysis into our trading plan.

Technical analysis uses stock price movements and trading activity as the basis for drawing a conclusion about where the price may be headed. It is based on the premise that prices move in trends that tend to continue until something changes to affect the balance of supply and demand for the stock. These changes can be detected by analyzing prior changes, looking for recurring patterns that indicate a price trend, or indicate areas of support and resistance that may influence the price direction.

SEE THE RESULTS FROM THIS MONTH…

The market was in a blast mode as it ran to record highs again. We had all winners this month with max income trades. And how about the monthly returns on the PUT trades – 4.8% on ARRY; 8.8% on TLRD; 9.6% on NL; and 8.7% on MDXG!!! This is a yearly return on some buy and hold stock investments in a monthly trade for us. We will look for more stock breakouts for PUT trades in our next newsletter.

Sell Put on Array Biopharma (ARRY)

STRATEGY: Look at the December 2017 11 cash-secured put trade. For each 100 shares of ARRY stock you want to control, sell one DEC 2017 11 put option for a $0.50 debit per option or better. That’s potentially a 4.8% return on the cash-secured put trade.

Actions: ARRY is currently trading at $10.82 so the 11 PUT we sold is ITM. Buy to close the PUT before expiration if the stock price is below the strike price of 12. If stock above 12, PUT will expire.

Sell Put on Tailored Brands (TLRD)

STRATEGY: Look at the December 2017 16. cash-secured put trade. For each 100 shares of TLRD stock you want to control, sell one Dec 2017 16 put option for a $1.30 debit per option or better. That’s potentially a 8.8% return on the cash-secured put trade.

Actions: TLRD is currently trading at $19.46 so the 16 PUT we sold is OTM. Let the options expire on 12/15.

Sell PUT on NL Industries (NL)

STRATEGY: Look at the December 2017 12.5 PUT trade. For each 100 shares of NL stock you want to control, sell one Dec 2017 12.5 PUT option for a $1.10 debit per option or better. That’s potentially a 9.6% return on the PUT trade.

Actions: NL is currently trading at $13.30 so the 12.5 PUT we sold is OTM. Let the options expire on 12/15.

Sell Put on Mimedx Group (MDXG)

STRATEGY: Look at the December 2017 10 cash-secured put trade. For each 100 shares of MDXG stock you want to control, sell one Dec 2017 10 put option for a $0.80 debit per option or better. That’s potentially a 8.7% return on the cash-secured put trade.

 

Actions: MDXG is currently trading at $12.25 so the 10 PUT we sold is OTM. Let the options expire on 12/15.

A 600% Trade in 2 Days for Fast Cash!

On Dec 5,subscribers sold PUTs on US Steel (X) for $1.24 per option.  Our stock chart indicator identified an Ascending Continuation Triangle in the stock.  This is an indication the stock had positive momentum and was ready to break out.  Our strategy is to sell PUTs on the breakout and buy to close the PUTs to lock in profits.  This allows subscribers to close out of trades early (locking in profits) to compound your dollars into more trades.  The more compound trades increase the total monthly income.

So how did the trade work out for investors?

On Dec 7 (yes only two days later), subscribers bought to close the PUTs on X for $0.30 per option.  X was trading at $29.84 at the trade entry but jumped to $33.00 per share in the following days!  We closed the position to lock in fast cash following the stock breakout trade.

This resulted in a gain of $94 per option sold in only 2 days.  If you had sold 10 PUTs, you would have made $940 in 2 days on one trade.  This is a 3.3% cash return in 2 days or 600% annualized trade.

Join the newsletter for only $29.99 is the best deal for making monthly income.  Let’s see, spend less than $30 to make $940 on one trade and a few $thousand each month in extra income!  Join the Monthly Income Newsletter to create your income monster.

 

Here is the details of the US Steel (X) Trade shared with subscribers on Dec 5:

Stock: United States Steel Corporation (X) produces and sells flat-rolled and tubular steel products primarily in North America and Europe. It operates through three segments: Flat-Rolled Products (Flat-Rolled), U. S. Steel Europe (USSE), and Tubular Products (Tubular). The Flat-Rolled segment offers slabs, rounds, strip mill plates, sheets, and tin mill products.

Chart: We have detected an “Ascending Continuation Triangle” chart pattern formed on United States Steel Corp (X on NYSE). This bullish signal indicates that the price may rise from the close of 29.84 to the range of 33.20 – 34.00. The pattern formed over 29 days which is roughly the period of time in which the target price range may be achieved.

United States Steel Corp has a current support price of 27.10 and a resistance level of 30.21.

Strategy: We have an opportunity to sell options for income with X as the stock should trade higher in the coming weeks. I recommend to place your trade and exit when you have locked in profits due to the stock price moving higher. Our goal here is to make income short term so we can exit and compound capital into another trade.

For medium risk option trade, look to sell a December 2017 30 PUT for about $1.00. This creates a return of 3.4% to expiration in 10 days or greater than 124% annualized.

For a conservative trade, you can setup a covered call trade. You can purchase 100 shares of X and sell a December 30 CALL option for about $0.90 for an assigned return of 3.4% in 10 days for a 124% annualized return.

We continue to identify winning option trades to generate income and to exit early as the stock bullish patterns moves prices higher.

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Option Basics – Option Premium

The premium is the price paid or received for an option.  Options are traded much like stocks with the bid and ask prices as shown:

  • Seller receives the bid price;
  • Buyer receives the ask price;
  • The marker marker keeps the spread between bid and ask prices.

The premium refers to the total amount received for selling the option contract not the option price.  The premium means the option’s contract price on a per share basis.  For example, if the option contract price is shown as $1.25, this means you receive $1.25 per share or $125.00 per contract ($1.25 * 100 shares).  

The premium can be intrinsic and time value.  Intrinsic value is the portion of premium that is in-the-money.   Time value is the portion of premium that is not in-the-money which is also known as “extrinsic value.”  Time value is the amount upon which the return is calculated in covered call writing.  The equation is:

Total Premium = Intrinsic Value + Time Value

Calculating time value and intrinsic value is simple.  You calculate the intrinsic value portion of the option premium, then the remainder is time value.  The entire premium of an ATM or OTM call option will to 100% time value.  The real value of option premium for sellers is the time value portion of premium.  The profit in covered call returns lies solely in time value.  

Parity simply means that the option is trading at intrinsic value which occurs to ITM options.  Options seldom trade at a few pennies below parity.  ITM options then to trade at parity when they are close to expiration or there is no expected volatility in the underlying stock.

Time decay means that the time value portion of the option premium will decay or shrink as time runs out.  The intrinsic value never decays due to the passing of time.  Time decay increases as the option nears expiration as time decay accelerates in the last 30 days of the options life.  people who write covered calls in the current expiration month are seeking income from time decay.  Remember, time value is on the side of the option seller not the buyer as time destroys the option premium of the buyers investment.

Theta is the expected change in an option premium for a single day’s passage of time.  If all other factors are the same, then option premium will be lower the next trading day by the theta value of the option.  Theta expresses time decay as an options time value.

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Make 80% with this Income Trade

As income investors, we seek to create consistent monthly income by selling options to collect monthly premiums. This has been successful for our investors for years. Option selling offers another method to diversify investing strategies beyond traditional dividend investing. We have combined technical stock events with our strategy to identify high returns option selling opportunities. This income trade will generate a return of more than 80% annualized.

Stock: Lannett Company, Inc. (LCI) develops, manufactures, packages, markets, and distributes generic versions of brand pharmaceutical products in the United States. The company offers solid oral, extended release, topical, nasal, and oral solution finished dosage forms of drugs that address a range of therapeutic areas, as well as ophthalmic, patch, foam, buccal, sublingual, soft gel, and injectable dosages.

The faster moving average recently crossed above the slower moving average, signaling a new uptrend has been established.

Chart: We have detected an “Ascending Continuation Triangle” chart pattern formed on Lannett Co Inc (LCI on NYSE). This bullish signal indicates that the price may rise from the close of 27.50 to the range of 31.25 – 32.50. The pattern formed over 29 days which is roughly the period of time in which the target price range may be achieved.

Lannett Co Inc has a current support price of 23.15. No resistance level has been found.

 

Strategy: We have an opportunity to sell options for income with LCI as the stock should trade higher in the coming weeks. I recommend to place your trade and exit when you have locked in profits due to the stock price moving higher. Our goal here is to make income short term so we can exit and compound capital into another trade.

For medium risk option trade, look to sell a December 2017 25 PUT for about $0.80. This creates a return of 3.3% to expiration in 15 days or greater than 80% annualized.

For a conservative trade, you can setup a covered call trade. You can purchase 100 shares of LCI and sell a December 25 CALL option for about $2.25 for an assigned return of 3.3% in 15 days for a 80% annualized return.

We continue to identify winning option trades to generate income and to exit early as the stock bullish patterns moves prices higher.

 

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Income Trade for 70% Return

As income investors, we seek to create consistent monthly income by selling options to collect monthly premiums. This has been successful for our investors for years. Option selling offers another method to diversify investing strategies beyond traditional dividend investing. We have combined technical stock events with our strategy to identify high returns option selling opportunities. This income trade will generate a return of more than 70% annualized.

Stock: Teck Resources Ltd is engaged in the business of exploring for, acquiring, developing and producing natural resources. The Company’s activities are organized into business units that are focused on steelmaking coal, copper, zinc and energy. It operates in five segments: steelmaking coal, copper, zinc, energy and corporate. The corporate segment includes all of its activities in commodities other than copper, coal, zinc and energy.

The RSI is above its neutrality area at 50. The MACD is negative and above its signal line. The MACD must break above its zero level to trigger further gains. Moreover, the stock is above its 20 and 50 day MA (respectively at 21.51 and 21.89).

Chart: We have detected a “Double Bottom” chart pattern formed on Teck Resources Ltd (TECK). This bullish signal indicates that the price may rise from the close of 22.42 to the range of 23.90 – 24.30. The pattern formed over 18 days which is roughly the period of time in which the target price range may be achieved. Teck Resources Ltd has a current support price of 21.22 and a resistance level of 22.93.

 

 

 

 

 

 

 

Strategy: We have an opportunity to sell options for income with TECK as the stock should trade higher in the coming weeks. I recommend to place your trade and exit when you have locked in profits due to the stock price moving higher. Our goal here is to make income short term so we can exit and compound capital into another trade.

We are selling PUTs to take advantage of the stock price move to the upside. For conservative traders, you can create a covered call trade using the call for downside protection.  Before you can become a millionaire, you have to start thinking like one.  It isn’t just a pathway to wealth.  It’s a way of life… a belief system… a mindset – and it will show you how to build a full, rewarding life.

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How to Make 6% per month using Income Trades

At Get Rich Investments, we focus on creating monthly income. One strategy is to sell puts on select stocks we identify being in a break out stock price position. The concept is simple, stocks with momentum will move higher in the short-term time period. To make monthly income, we sell puts on these stocks to capitalize on the price movement. If it moves higher, the value of the puts will decline. Investors can then buy to close the puts to lock in gains.

Then, back to selling puts for more monthly income if the stock is still a great selection. This can be a great strategy for monthly income as momentum stocks we trade have recently had a price breakout from a previous trading range. It’s alright for a stock to move up within a nice trading range. This makes the amount of premium collected higher based on some volatility. But we do not want to risk our trading capital by taking big losses so we exit the position to take profits in many cases.

For example, we had two put trades that each produced 6% in the past month. Here are the details:

On September 29 we entered a PUT trade on Gaslog (GLOG) that expired with a 6% gain. For subscribers, we sold puts on Grubhub (GRUB) that expired with a 6% return in our November Monthly Income Plan.

GLOG: For medium risk option trade, look to sell an November 2017 17.5 PUT for about $1.00. This creates a return of 6.0% with 49 days to expiration. This is an annualized 45% return.

GRUB: Subscribers: Look at the November 2017 52.5 PUT trade. For each 100 shares of GRUB stock you want to control, sell one Oct 2017 52.5 PUT option for a $3.00 debit per option or better. That’s potentially a 6.0% return on the PUT trade.

Why would an investor sell put options instead of just buying the stock? You already know my response to this question – to create monthly income. These trade examples are proof that we can earn high returns on income trades.

We monitor the market looking for stocks poised for break outs to sell puts for income. We provide several trades in the monthly income newsletter and several additional trades as opportunities arise.

Get access to put trades for monthly income by subscribing to our newsletter here:

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PAY IT FORWARD – Help stop hunger and shelter those in need

From $5K to $1 Million By Selling Options

Many investors ask me how much money is require to start investing and to become a millionaire. As we all know from our simple start in life, you can grow from a humble beginning to achieving financial success and independence. This is what we focus on with our monthly income trades with subscribers. Here is a recent headline from a CNBC interview with Ron Baron:

Any patient investor can turn $5,000 a year into nearly $1 million, says billionaire investor Ron Baron. “You have to have a small amount of money and invest it regularly for a long time,” Baron says. “It’s all about compounding,” the Baron Capital founder says, referring to the power of making regular investments and reinvesting the returns.

You have undoubtedly heard it said before – compounding returns is the eighth wonder of the world or man’s greatest invention. But to an investor it is a great wealth builder. While many income investors think of compounding dividends, this can also be accomplished by option sellers by compounding the option premium received by selling either put or call options. I think about the premium received as soon as the option is sold can be readily reinvested or compounded immediately.

Here is the formal definition from Investopedia:

Compound interest is interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan. Compound interest can be thought of as “interest on interest,” and will make a deposit or loan grow at a faster rate than simple interest, which is interest calculated only on the principal amount. The rate at which compound interest accrues depends on the frequency of compounding; the higher the number of compounding periods, the greater the compound interest.

The “Rule of 72” is an easy way to calculate how long it will take to double you money based on compounding returns. For example, an investor has a dividend stock paying an annual 5% dividend. Using the rule of 72, dividing 72 by 5 indicates the investor will double his money in 14.4 years. Not bad for a dividend producing asset. Now, let’s compare this to selling options. If you make 2% per month on average, you can double you money in 36 months (72/2=36). This is only 3 years compared to 14.4 years for the 5% dividend stock! Which investment do you want to pursue?

This is the theory behind our strategy to sell puts and covered calls at get rich investments. We can generate consistent income on a monthly basis that will provide us the opportunity to compound our money and returns at a faster pace than the buy and hold dividend investing.

Learn how to compound your money and the best stocks to use in this strategy to move from $5,000 to $1 million.

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New Income trade for 130% Annualized Return

Income Opportunity for 130% Option Trade
As income investors, we seek to create consistent monthly income by selling options to collect monthly premiums.  This has been successful for our investors for years.  Option selling offers another method to diversify investing strategies beyond traditional dividend investing.  We have combined technical stock events with our strategy to identify high returns option selling opportunities. This income trade will generate a return of more than 130% annualized.
 
Stock:  Zumiez (ZUMZ) is a leading specialty retailer of apparel, footwear, accessories and hardgoods for young men and women who want to express their individuality through the fashion, music, art and culture of action sports, streetwear, and other unique lifestyles. As of October 28, 2017 it operated 694 stores, including 604 in the United States, 51 in Canada, and 32 in Europe and 7 in Australia. ZUMZ operates under the names Zumiez, Blue Tomato and Fast Times.
ZUMZ announced that total net sales for the four-week period ended October 28, 2017 increased 10.0% to $61.5 million, compared to $55.9 million for the four-week period ended October 29, 2016. The Company’s comparable sales increased 6.6% for the four-week period compared to a comparable sales increase of 10.2% in the year ago period.
 
Earnings Per Share (EPS) was up 49% compared to the same quarter in the prior year. This tells us the company increased earnings and/or decreased the number of shares.
Return on Equity (ROE) is 8.01% for the latest twelve months. This reflects how efficient the company has been at turning a profit on the money shareholders have invested.
Chart: We have detected a “Symmetrical Continuation Triangle (Bullish)” chart pattern formed on ZUMZ. The stock’s price has broken upward to confirm a classic chart pattern, offering a target price for the intermediate-term in the range of 21.00 to 21.70 for a 19% price increase
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Option Basics – Option Strike Prices

Income investors need to know about option strike prices to optimize their trades. Here are some basics…

Stock option strike prices are the price stated on each call or put option.  The strike prices can be classified according to their relationship with the current stock price.  There are three categories:

  • In the money (ITM) defined as calls with strike prices below stock prices and puts with strike prices above stock prices;
  • At the money (ATM) defined as the call and put strike price at or near the stock price;
  • Out of the money (OTM) defined as calls with strike prices above the stock price and puts with strike prices below the stock price.

As you know, an option will move from category to category based on its relationship with the actual stock price movement.  For example, when a stock is trading at $50 the the $50 strike prices will be at the money.  When the stock price moves above $50, calls will be ITM while puts will be OTM.  Likewise, when the stock price falls below $50, then calls will be OTM and puts will be ITM.  Therefore, the category is totally dependent on the current stock price.

OTM options expired worthless while ITM will always be exercised by the holder because they still have a value at or near the expiration date.  When a stock option is exercised, the call holder buys the stock and the put holder sells the stock.  When options are exercised, the OCC decides to which brokerage firm the option will be assigned and the brokerage decides which customer will get the assignment. When you are assigned an exercise, those shares are said to have been called away or called out.

When stock options are American style, you can be assigned an exercise anytime the option is ITM.  Of course, early exercise is affected by the time value remaining on the option.  As time value begins to decline more rapidly as expiration nears, the holder is more likely to assign an ITM option.  In general, 10% of options are exercised, 60% are traded out and 30% expire worthless.  

 

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Income Trade for 45%

As income investors, we seek to create consistent monthly income by selling options to collect monthly premiums. This has been successful for our investors for years. Option selling offers another method to diversify investing strategies beyond traditional dividend investing. We have combined technical stock events with our strategy to identify high returns option selling opportunities. This income trade will generate a return of 45% annualized. We are coming off great trades such as RES and STM.

Stock: Gaslog (GLOG) is an international owner, operator and manager of liquefied natural gas (LNG) carriers. The Company provides support to international energy companies as part of their LNG logistics chain. The Company’s owned consolidated fleet consists of 27 LNG carriers, including 22 ships in operation and five LNG carriers on order.

Trend: We have detected a “Continuation Diamond (Bullish)” chart pattern formed on GasLog Ltd (GLOG). This bullish signal indicates that the price may rise from the close of 17.45 to the range of 22.00. The pattern formed over 244 days which is roughly the period of time in which the target price range may be achieved. GasLog Ltd has a current support price of 16.80 and a resistance level of 17.60.

Strategy: We have an opportunity to sell options for income with GLOG as the stock should trade higher in the coming weeks. I recommend to place your trade and exit when you have locked in profits due to the stock price moving higher. Our goal here is to make income short term so we can exit and compound capital into another trade.

For medium risk option trade, look to sell an November 2017 17.5 PUT for about $1.00. This creates a return of 6.0% with 49 days to expiration. This is an annualized 45% return.

For a conservative trade, you can setup a covered call trade. You can purchase 100 shares of RES and sell an November 17.5 CALL option for about $0.80.

We continue to identify winning option trades to generate income and to exit early as the stock bullish patterns moves prices higher.

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