Get Rich - Stay Rich - Investing for Monthly Income

Posts Tagged ‘monthly income’

Option Basics – What Vega Means to the Covered Write

Vega measures the sensitivity of the price of an option to changes in volatility. Vega is the estimate of the change in theoretical value of an option for the 1% increase in implied volatility. A higher volatility means higher option prices while a lower volatility means lower option prices. Vega is the measure of changing volatility on option prices. A higher volatility means an expected higher price swings in the stock.

An increase in volatility will increase the price of options on the stock while a decrease in volatility will cause all options on the stock to decrease. The vega of a long call or put option is always positive while the short calls and puts are negative. At-the-money (ATM) options have the highest vega so they are most sensitive to volatility changes. The further an option goes ITM or OTM, the smaller its vega will be. As volatility decreases for ITM and OTM options, vega is unchanged for ATM options. Vega decreases when time elapses similar to call premium decay. This causes vega to be higher for long dated options than short dated options. Of course, LEAPs have a high vega so an increase in volatility will raise the time value of the option.

For example, a stock that is trading at $35 with a high volatility of .75 with a vega of 30%. The stock option will lose $.30 for every 1% decrease in volatility and gain $.30 for every 1% increase in volatility. If volatility decreases by 20 points, then the stock option will decrease by $6.00. This suggests that you do not want to buy any call or put with a high volatility. Vega can cause option prices to change even if the stock price does not change.

Typically, I do not use vega in covered call trades as I tend to only sell options on stocks below 40% volatility and usually in the current option month. However, vega is important if you use LEAPs as a replacement for stock in a covered call trade.

Get new trades for cash-secured puts and CC trades.

Join the Monthly Income Newsletter voted the best value for option income trading

Follow us on Twitter – @GetRichStayRich

You Can Help End Poverty

Close Trade for 76% Return

Monthly income seekers should close the position on KR as the stock has increased from the entry price of $24.12 to the closing price of $25.52.  Investors will lock in a 2.1% return in 10 days for an annualized return of 76%.

 

Sell Put on The Kroger Company (KR)

STRATEGY: Look at the May 2018 24 cash-secured put trade. For each 100 shares of KR stock you want to control, sell one May 2018 24 put option for a $0.70 debit per option or better. That’s potentially a 3.0% return on the cash-secured put trade.

A “Double Bottom” chart pattern formed on The Kroger Co (KR on NYSE). This bullish signal indicates that the price may rise from the close of 24.58 to the range of 25.30 – 25.50. The pattern formed over 18 days which is roughly the period of time in which the target price range may be achieved. The Kroger Co has a current support price of 23.48 and a resistance level of 28.01.

 

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.

Join the Monthly Income Newsletter voted the best value for option income trading

Follow us on Twitter – @GetRichStayRich

You Can Help End Poverty

Option Basics: Risk and Diversification

The winners in option trading are those who manage the risk within their portfolio.  You must always monitor and protect your capital as if you lose your capital you will be out of the game.  Proper risk management starts with trading diversification and discipline to stick with your trading plan.

There are generally two types of portfolio risk: systematic and unsystematic.

Systematic Risk, also called non-diversifiable risk, is risk that cannot be eliminated.  It arises from factors which cause the whole market to move up or down, and can not be eliminated by diversification because it affects all securities. Examples of systematic risk are political or sociological changes that affect all securities.  Some of the most common forms of systematic risk are changes in interest rates or inflation.

Unsystematic Risk, also called diversifiable risk can be reduced or eliminated by diversifying your portfolio.  Unsystematic risk is risk that is unique to a certain industry, firm, or company.  Examples of unsystematic risk include: a company’s financial structure, weather and natural disasters, labor strife and a shortage of raw materials.  Since unsystematic risk affects a single company or industry, it can be mitigated by investing in many companies across a broad range of industries.

Option positions should be diversified.  A major advantage of option purchases is ‘truncated risk’, whereby your loss is limited to your initial investment yet your profit is virtually unlimited.  Option sells have a limited profit but should be diversified across several investments.  Diversification will allow you to use truncated risk to its maximum advantage.  While some of your positions will inevitably be  unprofitable, each profitable trade can offset several unprofitable trades. Option positions should be established among many underlying stocks and indexes in unrelated industries. This gives you diversification, which can help mitigate sector weakness.

**************************************************************************

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

*************************************************************************

In order to trade options, your broker must first approve your account for option trading. There are various levels of option trading and each level has financial requirements that differ from broker to broker:

Level 1: Covered call writing
Level 2: Call and put purchases and covered put writing
Level 3: Spreads (requires margin)
Level 4: Uncovered call and put writing (requires margin)
Level 5: Index option writing (requires margin)

Be sure to ask your broker about their requirements for the level of options you plan to trade. Lastly, before you trade options, regulations require that you read Characteristics and Risks of Standardized Options prepared by the Options Clearing Corporation (OCC) and available from your broker.

Characteristics and Risks of Standardized Options prepared by the Options Clearing Corporation (OCC) and available from your broker.

Join the Monthly Income Newsletter voted the best value for option income trading

Follow us on Twitter – @GetRichStayRich

Help Us End Poverty

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.

Join the Monthly Income Newsletter voted the best value for option income trading

Follow us on Twitter – @GetRichStayRich

You Can Help End Poverty

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.

*******************************************************************

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

*************************************************************************

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.

Join the Monthly Income Newsletter voted the best value for option income trading

Follow us on Twitter – @GetRichStayRich

You Can Help End Poverty

Learn To Make Monthly Income Trading Stocks And Options.

Close This Trade for 450% Gain

2/1/2018 – MOD closed at $24.30 per share today. Buy to close the MOD 22.5 PUTs at $0.20 per contract.  This is a gain of $0.80 per option in 3 trading days. This is a 3.7% gain or 450% annualized return.

1/29/2018 – Get Rich Subscribers Release (NEW 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 93% annualized.

Stock: Modine Manufacturing Company (MOD) develops, manufactures, and markets engineered heat transfer systems and heat transfer components for use in on- and off-highway original equipment manufacturer vehicular applications.

The RSI is above 50. The MACD is positive and above its signal line. The configuration is positive. Moreover, the stock is trading above both its 20 and 50 day MA (respectively at 21.53 and 21.73).

Chart: We have detected a “Symmetrical Continuation Triangle (Bullish)” chart pattern formed on Modine Manufacturing Co (MOD on NYSE). This bullish signal indicates that the price may rise from the close of 23.25 to the range of 26.70 – 27.50. The pattern formed over 43 days which is roughly the period of time in which the target price range may be achieved. Modine Manufacturing Co has a current support price of 21.15. No resistance level has been found.

Strategy: We have an opportunity to sell options for income with MOD 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 February 2018 22.5 PUT for about $1.00. This creates a return of 4.6% to expiration (18 days) or greater than 93% annualized.

For a conservative trade, you can setup a covered call trade. You can purchase 100 shares of MOD and sell a February 22.5 CALL option for about $1.75 for an assigned return of 4.6% in 18 days.

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

Join the Monthly Income Newsletter voted the best value for option income trading

Follow us on Twitter – @GetRichStayRich

You Can Help End Poverty

Why Sell Covered Calls?

Sellers of covered calls seek two objectives: additional income from their stock portfolio and protection from a market decline in the price of their stocks.  The call premium helps the option writer to achieve these goals.  With the covered call strategy, you can use stocks you already own or you can purchase new shares to sell covered calls on.  In either case, you will not be overly concerned about the the price movement of your stocks over a period of time.  However, you will only write covered calls on stocks you already own.
 
We can apply this call writing strategy to dividend paying stocks.  You will be getting two sources of income: the dividends and the premium you received from selling the calls.  In addition, there is potential for a third source of income if the stock were to increase in price.  If we were to allow the stock to be called away, we would receive the strike price in addition to the premium and dividends.  This is an outstanding scenario where you can potentially receive three sources of income from one investment!

However, the call writer does not have to remain obligated to deliver the stock.  The writer can terminate the obligation if it has not been exercised by purchasing to close an identical option at current premium price.  Also, if the option is exercised, you do not have to deliver the original stock as you can purchase new shares to fulfill your delivery obligation.

When you write a covered call, you still own the stock and can receive all dividends paid before the options expire.  When you sell options, you begin with an immediate profit rather than an uncertain potential gain.  The most you can make is the premium received and the price of the strike minus your cost of the purchase of stock.

There are always opportunities for investors to use options are part of their total investing plan.  With careful stock selection and monitoring of your position, selling options can:

    • Boost annual income by 15 percent or more;
    • Be used for tax benefits and low costs;
    • Offer a variety of choices such as the underlying stock, strike prices and time periods.

The best rule: never buy options, only sell them!  Buying options is speculation while selling options is investing.

Some income services charge $2,000 – $5,000 per year to subscribe.  These guys are getting rich from subscribers – not providing a cost effective service.  There are no gimmicks, no bait and switch or added fees.  You will be charged monthly with no required annual subscription.  We are convinced that you will like the quality of service and continue to make monthly income. You will create a new stream of monthly income with our service.

Join the Monthly Income Newsletter voted the best value for option income trading

Follow us on Twitter – @GetRichStayRich

You Can Help End Poverty

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.

Join the Monthly Income Newsletter voted the best value for option income trading

Follow us on Twitter – @GetRichStayRich

You Can Help End Poverty

Dividends Are Losing Their Allure

Investors have long looked to dividend stocks as a means to generating investment income.  For decades this has been an effective strategy to increase cash from investing. However, in today’s market investors are more uncomfortable on how to identify new income opportunities.  They should consider allocating a portion of their portfolio to selling options for premium income.  The returns can be as high as 5% or more in a single month using the stock breakout strategy.

In a recent article published in the Wall Street Journal, “Dividends are losing their allure due to rising rates”, there is a case that yields are too low in today’s market. Here is an excerpt:

A heated stock market rally combined with a sharp climb in benchmark interest rates this year is eroding the relative value of companies that pay out chunky dividends to their shareholders.

Low interest rates over the past few years have boosted the attractiveness of high-dividend stocks that offer up income at a time when bond investors were earning next to nothing. For some sectors, that was a key reason to invest. But recently that’s reversed.

As the S&P 500 has climbed, the share of investment gains coming from collecting those dividends has been falling. The S&P 500′s so-called dividend yield over the last 12 months was at 1.73% Tuesday, its lowest since 2011. 

Let’s exam what a 1.73% yield means to an investor.  This means an investor will earn 0.4325% each quarter or 0.144% each month.  Based on having $10,000, an investor would earn $173 per year or $14 per month. What can one do with $14 per month or $144 if you invest $100,000? Not MUCH!

For investors seeking monthly income, there is a better way to create cash with your investment portfolio.  At Get Rich Investments, we have produced returns of 5% or more in a month which is an annualized return of 60%.  You may ask if this is a risky investment to achieve such a great return.  While all investments have some level of risk, this investment rewards the investor with a significantly higher return.

We achieve these returns by selling PUT options (cash-secured) or CSPs on stocks trending higher due to stock breakouts.  By selecting stocks with upward movement, it decreases the risk in the investment. This is the secret sauce to high returns using option selling strategies. When the stock moves higher, investors can exit the trade to lock in profits. Then, compound their capital weekly or monthly. This is how investors can create a monthly income far greater than dividend stocks without the risk of chasing penny stocks.

Here are some recent trades producing high returns for monthly income:

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.

Join the Monthly Income Newsletter voted the best value for option income trading.

Follow us on Twitter – @GetRichStayRich

You Can Help End Poverty

Shop at Chanceslilyshop.com

Shop at Chanceslilyshop.com

Subscribe for FREE Trades

Subscribe for FREE Trades

* indicates required
/ ( mm / dd )
Archives