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Posts Tagged ‘put strategy’

Winning in the Year of the Improbable

The word “improbable” is defined as not likely to be true or to happen. Have you noticed how many events have happened in 2016 that were improbable? The Cleveland Cavaliers were trailing 3 – 1 in the NBA Finals but rallied to win the first world championship for the city of Cleveland. Last night, the lovable losers, Chicago Cubs, completed a 3-1 rally to win the World Series. It ended a 108 year drought in Chicago for the Cubs. Now, this is an improbable event. There have been others such as the surprise Brexit vote that tanked markets a few months ago. What’s next? Does Trump win the presidency?

The stock markets have pulled back in the last week due to uncertainty around the election coupled with projected FED interest rate increases. Today, a talking head on CNBC was calling for investors to sell everything as the market is ready to crash! I have seen these types before and they don’t scare me. I plan to stick to doing what my investors do best – sell options for income.

Yes, markets will pullback when they lack clear direction. But I have some downside protection by selling options and continue to reap income along the way. If I just sit in a long stock position, its value will fluctuate with the market. I prefer to create income each month regardless of the market direction. I sell call options on the stock I own for both income and protection. When the market rebounds, I will sell put options for additional income too.

With this strategy, there is no improbable event. You get paid when you sell the options and can continue to compound your income.

You don’t need to worry about the next improbable event – join the Millionaire’s Club today.

How Put Selling Creates Monthly Income

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. There are several reasons investors should include put writing as a portion of their investment portfolio. Here is my list:

First and foremost is to create income. In this case, we are looking to collect the cash premium from selling the put option and not necessarily purchase the stock. This concepts is very important to better understand. My initial objective is capturing the premium but I realize in some cases the stock will be put to me. This is why I only sell puts on a select list of stocks I am willing to own if put to me. I like to focus on world class stocks that have stable earnings, strong balance sheets, pay growing dividends and trade within a low beta range in the market. This is part of my success using this strategy as I can collect dividends and sell covered calls for more income if the stock is put to me.

Secondly, I can purchase the stock at a lower price or discount to its current market price. The cash premium I collect from selling the put option reduces the capital outlay to enter or purchase the stock. I have experienced periods where I would sell monthly puts on a stock for 6 to 9 months before the stock was put to me. The amount of premiums added together made the entry price of stock significantly below the market price. For example, assume I average premiums of $100 over 6 months of monthly put writing which sums to $600. I have just lowered the purchase price of the stock by $600 – this is buying stocks at a discount.

Lastly, 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 is the best income strategy I use in today’s market. In the October expiration cycle, our subscribers made 1.6% for the month by selling put options. For the past 3 months, monthly returns range from 1.5% to 3.1%.  How would you like to an extra $500, $1,000, $2,000 or more in income each month? Learn how to create monthly income by joining our investment newsletter.

 

How to Develop Multiple Streams of Income

To achieve financial independence, you must create a level of income to cover the lifestyle you desire. There are many ways to accomplish an income to fund your life experiences. Many work during their life to save money for this purpose. Some are entrepreneurs that start businesses usually with hired managers to carry the workload to create their income. Others invest in passive investments such as rental housing. Here is a look at investing strategies to increase your earnings and create multiple streams of income.

In author Thomas C. Corley’s five-year study of self-made millionaires he found that many of them develop multiple streams of income: 65% had three streams, 45% had four streams, and 29% had five or more streams.

“Three streams of income seems to be the magic number for the self-made millionaires in my Rich Habits study, but the more income streams you can create in life, the more secure will your financial house be,” he writes.

I apply Corley’s thinking to my investment portfolio by identifying several streams of income. One passive income stream is collecting growing dividends from world class stocks. These stocks have a strong financial position, competitive market position, known brand and growing dividend history. I also invest in closed-end funds that pay monthly dividends. This create a diversification opportunity as I can add fixed income, preferred stocks and other types of investments. Lastly and probably more important, I sell options for monthly premium income. This includes selling cash-secured puts and covered calls. I love this strategy and have created a consistent, growing stream of income.

Join me in creating multiple streams of incomes to live the life you desire.

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