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How To Create Your Own High Yield Cash Machine

Many investors look to their portfolios for income.  To get current income, these investors should look for high yield investments.  High-yielding investments can be a little confusing if you just search for the biggest yields.  This article will share some guidelines to creating a cash machine for high income.

A “Real” High Yield Investment:

  • Pays dividends yields of 5% to 20% annual
  • Highly liquid vehicles that can be bought or sold through discount or online brokers
  • Less volatility than the average large cap stock portfolio
  • Drives dividends from cash-flow, not debt payments
  • Pays dividends monthly and/or quarterly

There are so many investment categories that offer high yield securities.  Here is a list of high yield investments:

  • Business Development Companies (BDCs)
  • Canadian Royalty Trusts
  • Closed End Funds
  • Convertible Securities
  • Corporate Bonds
  • Emerging Market Debt
  • Exchange Traded Funds (ETFs)
  • Exchange Traded Notes (ETNs)
  • Grantor Trusts
  • Master Limited Partnerships (MLPs)
  • Oil/Shipping Tanker Stocks
  • Option Income Funds
  • Preferred Stocks
  • Real Estate Investment Trusts (REITs)
  • Structured Products (i.e. STRIDES)

 While do you want to buy high yielding investments?  The five keys to the cash machine high income investment strategy are as follows:

  1. It pays a double-digit yield
  2. It’s highly diversified
  3. It’s highly liquid
  4. It’s flexible
  5. It offers upside appreciation with less volatility than common stocks

 To build your own cash machine portfolio you must do the following:  

  • Desire to build income portfolio
  • Look for securities paying yields of 5% to 20%
  • Invest in asset classes with strong fundamentals in pockets of economic strength
  • Rotate in and out of sectors of strength
  • Target capital appreciation of 10% to 15% per year

The bottom line is that all income investors should have at least a portion of their income in a cash machine with high yield investments.

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Learn To Make Monthly Income Trading Stocks And Options.

Using a Protective Put to Prevent Investment Losses

At Get Rich Investments, we create investing strategies to capture monthly income. This may take the form of covered call trades, cash-secured put trades, CEFs for monthly dividends and other strategies. However, as the market volatility increases such as we have experienced lately, investors get worried about protecting their capital. We do have an answer which is an effective strategy. It is called a protective put trade to protect against losses during a price decline. We like to also combine the protective put with our covered call strategy to have our income and protect our capital at the same time.

Please don’t take my word for it , here is how our friends at Fidelity Investments describe using a protective put.

There are two types of options: calls and puts. The buyer of a call has the right to buy a stock at a set price until the option contract expires. The buyer of a put has the right to sell a stock at a set price until the contract expires.

If you own an underlying stock or other security, a protective put position involves purchasing put options, on a share-for-share basis, on the same stock. This is in contrast to a covered call which involves selling a call on a stock you own. Options traders who are more comfortable with call options can think of purchasing a put to protect a long stock position much like a synthetic long call.

The primary benefit of a protective put strategy is it helps protect against losses during a price decline in the underlying asset, while still allowing for capital appreciation if the stock increases in value. Of course, there is a cost to any protection: in the case of a protective put, it is the price of the option. Essentially, if the stock goes up, you have unlimited profit potential (less the cost of the put options), and if the stock goes down, the put goes up in value to offset losses on the stock.

Let’s highlight how the protective put works. Assume you purchased 100 shares of XYZ Company at $50 per share six months ago. The cost of this trade was $5,000 ($50 share price multiplied by 100 shares).

The stock is now trading at $65 per share, and you think it might go to $70. However, you are concerned about the global economy and how any broad market weakness might impact the stock.

A protective put allows you to maintain ownership of the stock so that it can potentially reach your $70 price target, while protecting you in case the market weakens and the stock price decreases as a result.

Learn To Make Monthly Income Trading Stocks And Options. Related: Stock Market, Trader, Trading, Investing, Investor, Investment, Option, Currencies, Currency, Swing Trading, Day Trading, Futures, Forex CLICK HERE

When the stock is trading at $65, suppose you decide to purchase the 62 XYZ Company October put option contract (i.e. the underlying asset is XYZ Company stock, the exercise price is $62, and the expiration month is October) at $3 per contract (this is the option price, also known as the premium) for a total cost of $300 ($3 per contract multiplied by 100 shares that the option contract controls).

If XYZ continues to go up in value, your underlying stock position increases commensurately and the put option is out of the money (meaning it is declining in value as the stock rises). For instance, if at the expiration of the put contract the stock reaches your $70 price target, you might then choose to sell the stock for a pretax profit of $1,700 ($2,000 profit on the underlying stock less the $300 cost of the option) and the option would expire worthless.

Alternatively, if your fears about the economy were realized and the stock was adversely impacted as a result, your capital gains would be protected against a decline by the put. Here’s how.

Assume the stock declined from $65 to $55 just prior to expiration of the option. Without the protective put, if you sold the stock at $55, your pretax profit would be just $500 ($5,500 less $5,000). If you purchased the 62 XYZ October put, and then sold the stock by exercising the option, your pretax profit would be $900. You would sell the stock at the exercise price of $62. Thus, the profit with the purchased put is $900, which is equal to the $500 profit on the underlying stock, plus the $700 in-the-money put profit, less the $300 cost of the option. That compares with a profit of $500 without it.

As you can see in this example, although the profits are reduced when the stock goes up in value, the protective put limits the risk to the unrealized gains during a decline.

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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Want to be a Millionaire?

If you’re hoping to reach millionaire status some day, there’s one small move you can make now that will virtually guarantee it: automatically save an hour a day of your income. At least this is the advice from David Bach author of “The Automatic Millionaire.” This is good advice to start a savings plan to move toward financial dependence which is what we strive for in our investing at Get Rich Investments.

Suppose you make $50,000 annually and you work a full-time job, 40 hours a week. You’ll be paid for about 2,080 hours of work in a year, equaling roughly $25 per hour. Bank that much each day, and you’ll be golden, according to Bach.

We like to take this advice a step farther than Bach. It is always productive to develop a habit of saving money. This money can be used to create wealth and ultimately financial independence. The majority of us started our financial journey this way. While saving is a starting point, how you invest this money can accelerate your timeline to millionaire status.

You need to create an emergency account to cover 3-6 months of income. Then, invest in world class dividend stocks that growth their dividends over time. Look to invest in some closed-end funds (CEFs) that pay monthly dividends. There are so many CEFs to allow the investor to diversify across different market sectors to include REITS, preferred stocks, bonds and other types of investments. And sell options to generate immediate income!

This is what we excel at in our monthly income plan. I use put selling to create my favorite income strategy – the Put-Call-Dividend (PCD) Income Strategy. This is simple selling puts each month on a select stock to collect monthly income. If the stock gets put to me, then I sell covered call options for more income while also collecting dividends paid by the stock. I sell call options for premium each month until the stock is called away from me. Then, I will start selling puts against the stock again. This strategy is exactly why I only sell puts on stocks I want to own – world class, strong dividend stocks.

This create a method to compound your returns as you rollover the options income to create even more income. If you’re hoping to reach millionaire status some day, this will accelerate your journey.

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New Option Income Trade for 70% Return

Income Opportunity for 70% 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 70% annualized.

Stock: Skechers U.S.A., Inc. (SKX) designs, develops, markets, and distributes footwear for men, women, and children; and performance footwear for men and women under the Skechers GO brand worldwide. It operates through three segments: Domestic Wholesale Sales, International Wholesale Sales, and Retail Sales.

Chart: We have detected a “Continuation Diamond (Bullish)” chart pattern formed on Skechers USA Inc (SKX on NYSE). This bullish signal indicates that the price may rise from the close of 39.77 to the range of 44.00 – 45.00. The pattern formed over 50 days which is roughly the period of time in which the target price range may be achieved. Skechers USA Inc has a current support price of 38.21 and a resistance level of 40.37.

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Learn To Make Monthly Income Trading Stocks And Options. Related: Stock Market, Trader, Trading, Investing, Investor, Investment, Option, Currencies, Currency, Swing Trading, Day Trading, Futures, Forex CLICK HERE

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Strategy: We have an opportunity to sell options for income with SKX 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 March 2018 40 PUT for about $1.50. This creates a return of 3.9% to expiration (20 days) or greater than 70% annualized.

For a conservative trade, you can setup a covered call trade. You can purchase 100 shares of SKX and sell a March 40 CALL option for about $1.35 for an assigned return of 4.1% in 20 days.

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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Learn To Make Monthly Income Trading Stocks And Options.

How to Capture a 50% Return During a Market Correction

Many investors have a belief that it is impossible to make income selling options during a market correction. I am here to show you how my subscribers have continued to sell PUT options during the recent market downturn. With the market down over 1,000 points? What are we crazy to take on this risk? Here is the trade we offer up as an example.

My subscribers entered a PUT option trade on WK (below) by selling22.5 PUT options with a February expiration. We entered the trade on January 19. In comparative terms, the SPY was around 280 at this time but fell to 255 in just three weeks. However, WK had increased to $23.50 or so at this time and finished the expiration over $25 per share.

This was a big win for PUT sellers as we captured a 4.2% return during a 10% market correction. This is a an annualized 50% return on a monthly income trade. And proof you can make money selling options in a down market. Our strategy is to identify stocks with upward price momentum that we can earn option income with an early exit point to compound returns.

 

 

 

 

 

 

 

 

Sell Put on Workiva (WK)

STRATEGY: Look at the February 2018 22.5 cash-secured put trade. For each 100 shares of WK stock you want to control, sell one February 22.5 put option for a $0.90 debit per option or better. That’s potentially a 4.2% return on the cash-secured put trade.

A “Symmetrical Continuation Triangle (Bullish)” chart pattern formed on Workiva Inc (WK on NYSE). This bullish signal indicates that the price may rise from the close of 22.10 to the range of 24.20 – 24.80. The pattern formed over 46 days which is roughly the period of time in which the target price range may be achieved. Workiva Inc has a current support price of 21.45 and a resistance level of 22.10.

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Learn To Make Monthly Income Trading Stocks And Options. Related: Stock Market, Trader, Trading, Investing, Investor, Investment, Option, Currencies, Currency, Swing Trading, Day Trading, Futures, Forex CLICK HERE

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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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Why You Need Multiple Streams of Income

As we all know, when you work for an employer your time is not your own.  You are trading your time for income from wages.  Your vacation dates will likely be ruled by your employer.  While there is nothing wrong with working for a living, you should start preparing today for what you need in the future.  You can start investing for income part-time while you are still working for the man.
 
Here are some financial lessons to keep in mind when preparing for your future:

  • No matter how good you are at work, you are expendable;
  • The term job security can be an illusion;
  • You are not likely to get rich working for someone else;
  • Nobody cares about your money more than you do;
  • Social security may be restructured or may not be available when you retire;
  • The company pension is quickly if not already going away.

The list above is proof that you should seek multiple streams of income.  You should consider adding a 401K and/or IRA to supplement your waining social security checks.  The safest income streams are saving accounts and certificates of deposits both of which are best for emergency cash holdings.  Beyond this, you should start to think about additional income streams.  The obvious choices are dividend paying stocks and close-ended funds because they tend to be passive income.  Next, I would suggest you begin to learn how to sell covered calls against some of your dividend stocks or other stocks with potential to create additional income.  If you get good, you can advance to more difficult option strategies for another source of income.  You can even move into real estate investing to diversify your assets and create more monthly income.

One source of income is just not enough in today’s society.  Each of us should take the initiative to learn how to create additional income streams by using your assets rather than your time working for an employer.  The end result will be more income streams, more financial security and more time to do the things that make your life more enjoyable to you and your family.

Here, we sell options, covered calls and cash-secured PUTs, to create multiple streams of income while investing in CEFs paying monthly dividends.

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Get Money for Nothing and Your Stocks for Free

Covered calls generate income through call premium received and lowers the risk in the underlying stock position.  Obviously, the risk of owning a stock is the price you paid to purchase the stock.  Anytime the stock drops below the price paid to purchase the investor is now in a losing position.  If you purchase a stock that pays dividends, then dividends collected lowers the purchase price of a stock.  For example, you purchase FirstDividend stock (fictional name) for $30 that has a 3.0% dividend yield.  The dividend will be $0.90 per year or $0.23 per quarter. After the end of year one, your adjusted share price in FirstDividend will be $29.10 ($30-$0.90).  At a yield of 3.0%, your investment will double in 24 years just on the dividend without an increase in share price.

Now, let’s add a covered write to the stock each month.  For example, you can sell a $31 call at $0.75 that expires in 30 days.  Assuming that we don’t get called out, this will total to $9.00 at the end of year one if we continue to sell a call each month for the $0.75 premium.  This will drop the adjusted share price from $30 to $21 or 30% less than the price paid excluding your dividends.  This will double your investment in First Dividend in 2.4 years based on the call premium received each month.

If you combine the call premium with the dividend, then the adjusted stock price will be $20.10 at the end of year one.  This will further lower your time to double to 2.18 years.  This means that at the end of 2.18 years, you will have your total investments returned to you excluding any share price change or dividend increases and still own the stock.  This is a great benefit of selling calls against the stocks you hold in your portfolio.  In the first year alone, you will have received $990 in income for each 100 shares of stock you own.

The trade-off in writing calls against stock you own is that the topside is capped at the strike price of the call sold.  Therefore, you are at risk of selling your stock at the strike price which limits potential upside share price appreciation.  This should not be a problem for the investor that is seeking monthly income.  You must commit to writing calls for monthly as your chosen strategy to make monthly income and not be concerned that the share price will increase in a month.  Of course, if the stock gets called away then you can sell puts to get back into the position.  The put premium will serve to lower your adjusted share price just like the call premium in the example above.

You can continue the income cycle by selling puts to buy stock then sell calls when you own the stock.  Each month you are lowering your adjusted purchase price until you get your investment back and have a $0 cost in the stock.  All the while you are creating monthly income from your investment.  The end result is that you get your money for nothing and your stocks for free.

We continue to identify winning option trades to generate income and to exit early as the stock bullish patterns moves prices higher. Try our monthly income plan as you will definitely enjoy the extra cash.

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Factors Affecting Option Prices

While there are many factors that determine option prices, stock option premiums move in unison with the underlying stock price.  The most popular method for determining option value is the Black-Scholes Model.  There are six factors in this model:

  1. Stock price is the most important factor in an options price as changes in stock price affect the price of options on the stock;
  2. Strike price has an affect on option price through intrinsic value, time value, delta and other factors;
  3. Time to expiration is the time remaining before an option expires.  Due to time decay, option values can decrease at a faster rate when the option is closer to expiration;
  4. Stock volatility is the standard deviation of a stocks price variations over a fixed period of time.  The more volatile the stock, the more likely its price will move and the option price will increase with high volatility;
  5. Interest rates have little affect on option prices but they are part of the Black-Scholes model;
  6. Stock dividends also have little affect on option prices since they are already included in the stocks price by market forces.

There are other forces that can affect the price of options that are not included in the Black-Sholes model such as:

    • Supply and demand for the stock
    • Liquidity or volume of the option
    • Markets expectation of future events such as earnings, etc.
    • Markets expectation of future price direction of the stock

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.

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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Take Profits on These Trades for Triple-digit Gains

We released our Monthly Income Newsletter this past weekend with trades for the coming month.  Again, we have several early winners in our PUT trades for income in only 5 days or less. As the stock price moves higher, we close these positions to lock in profits.  This allows us to reallocate our capital to the next trade and to capture multiple income opportunities each month. We will release more PUT trades each week as our strategy is the best special dividend money maker on the market.
For subscribers:
We have a fast winner in $FINL as the stock had a big pop today – up over 12%. I suggest investors to buy-to-close this trade at ~$0.20 per option or less.  This gives us a nice 9% profit in 4 days or over 800% on an annualized return!
We have a another winner in $BEAT as the stock has moved higher to $31.75. I suggest investors to buy-to-close the 29 PUT trade at ~$0.20 per option or less.  This gives us a nice 3% profit in 5 days or over 200% on an annualized return!  There will be more trades moving into next week after the holiday.
The market was in a blast mode last month 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.

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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