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Option Income Trade for 43.6%

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 43% annualized. We are coming off a great trade in STM for a 40% gain.

Stock: RPC, Inc. (RES) provides a range of oilfield services and equipment for oil and gas companies involved in the exploration, production, and development of oil and gas properties in the United States, Africa, Canada, Argentina, China, Mexico, Eastern Europe, Latin America, and the Middle East. The company operates in two segments, Technical Services and Support Services.

Trend: We have identified a bullish “Upside Breakout” chart pattern. This bullish signal indicates that the stock price may rise from the close to the range of $25. The faster moving average recently crossed above the slower moving average, signaling a new uptrend has been established. The PMO supports the uptrend price movement.

The MACD is above its signal line and positive. The configuration is positive. Moreover, the stock is trading above both its 20 and 50 day MA (respectively at 19.54 and 20.12). RPC Inc is currently trading near its 52 week high reached at 23.36 on 25/01/17.

Strategy: We have an opportunity to sell options for income with RES 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 October 2017 22 PUT for about $0.90. This creates a return of 4.3% with 36 days to expiration. This is an annualized 43.6% return.

For a conservative trade, you can setup a covered call trade. You can purchase 100 shares of RES and sell an October 22 CALL option for about $1.10.

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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The Case for Income Investing

Today’s stagnant economy isn’t what it used to be. Societies, both individuals and governments, are saddled with enormous amounts of debt and yields have disappeared making it impossible to generate income from traditional fixed income investments.

Many top experts, including Jeff Gundlach who is considered the “Bond God,” believe this is the “new normal” and that rates could go even lower still. Which doesn’t offer a lot of hope to retirees who need income now, or future retirees who need to grow their portfolio at a much faster clip if they hope to retire at all.

Investors often overlook the value of selling options for income. This is in part because investors misunderstand the risk of these investments and how to manage this type of investment.  But many individual can benefit from these investments. If the income from selling puts and calls is reinvested every month, the investor can compound savings and buy more investments such as stocks, CEFs, etc.

This can be a growth strategy for investors no longer contributing to their portfolios or retirement accounts.  This type of portfolio of investments is likely to produce a higher yield than a growth stock portfolio. And, investors will benefit from the income even if the portfolio doesn’t have any capital appreciation or the market moves sideways. 

Investors can create a diversified portfolio for option selling by writing cash-secured puts, selling covered calls and owning dividend paying stocks and CEFs with monthly distributions.  If income is a goal, these option selling strategies and income investments could be worth a closer look.

I combine the strategies for market diversification of income opportunities.  Also, I combine then to create new investment vehicles.  The one strategy I prefer has 3 income opportunities: (1) selling put options to enter a stock, (2) collect dividends if put to me, and (3) sell covered calls until the stock is called away.

Where else, on even a modest portfolio, can you generate an extra $1,000 to $5,000 per month or more? Owning a basket of strong dividend paying blue chip stocks might earn you 3% to 5% per year. But to generate $5,000 per month in income you’d need a nest egg of $1.2 to $2 million dollars.

Get started collecting multiple streams of income today.

 

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