Building Wealth Last week, I showed you that I've been able to close out 188 winners in a row...
Over the holiday weekend, we've gotten quite a few e-mails from folks asking exactly how I did this and how my newsletter Retirement Trader works.
So today, I'm pulling back the curtains a bit and showing you how we can earn 20% annualized gains year after year.
We're going to look at a trade we closed in Retirement Trader earlier this year. Hopefully that will help clear up some of the confusion about what we do in my trading service and how it has led to a multiyear win streak...
Back in May, we wrote about a company we love: Booz Allen Hamilton (BAH).
If you've never heard of Booz Allen, to put it plainly, it does the work the government doesn't know how to do.
Booz Allen hires whiz kids from top schools as analysts who have expertise in technology, cybersecurity, analytics, engineering, and more. Then it contracts those employees to complete projects that are too complicated or too expensive for the government to run itself.
Here are just a few of the recent contracts that Booz Allen has been awarded...
- In May 2020, the U.S. Department of Defense agreed to spend $800 million over the next five years on Booz Allen's artificial intelligence services for the Joint Artificial Intelligence Center
- In May 2022, the company won the NASA Cybersecurity and Privacy Enterprise Solutions and Services contract worth up to $622.5 million.
- In September 2022, the U.S. Department of Veterans Affairs extended Booz Allen’s contract as program manager to implement electronic health records. The task order was worth $860 million. And the company was first paid $750 million in 2017 for the same project.
Booz Allen had a backlog of orders worth $30 billion. It's a company we would have loved to own. And for that reason, we decided to sell options on it.
Here's what we did... We sold the June $90 puts for about $2.15 with the stock trading at $91.90.
That may sound like a bunch of gibberish if you're not familiar with options. But please stay with me...
In our minds, Booz Allen was a terrific buy. We could have bought the stock and sat on it for many years. But in Retirement Trader, we want to collect income on world-class businesses... stocks like Booz Allen.
By selling June $90 puts, we agreed to buy shares of Booz Allen if it fell below $90 a share on June 16 (option-expiration day).
Of course, if Booz Allen was trading below $90 a share on June 16, we'd have been ecstatic to buy shares for just $90. Again, the stock was trading for $91.90 at the time of our trade and we'd have had no problem buying at that price.
Because we agreed to this deal, we were paid a $2.15 premium. And because one option contract deals with 100 shares of stock, this meant we received $215 for every put we sold.
Here's the thing... If Booz Allen closed above $90 by June 16, then we wouldn't have had to buy shares. We instead would have just walked away with the $215 and been done with the trade.
And that's exactly what happened... Booz Allen was trading for more than $90 a share at June expiration, so we didn't have to buy the stock. We just kept our $215 and then looked for the next moneymaking opportunity.
In total, we earned 3.2% from this trade (based on the capital to buy 100 shares of Booz Allen) in just 35 days. If we could make this trade every 35 days, we'd earn 33.6% for the year.
Hopefully this helps everyone who wrote in better understand what we do in Retirement Trader. We're not speculating and taking wild risks.
Instead, our trade boils down to this... We're paid a few hundred dollars because we agree to buy shares of a world-class company sometime in the future. If the stock falls enough by our agreed upon date, we'll buy the stock. Considering the cash we collected at the beginning of the trade, we're actually buying this blue-chip stock at a discount.
(We also have ways to make sure we never buy the stock at all.)
If the stock rises or stays flat, we don't buy the underlying stock. In this scenario, we just walk away with the few hundred dollars in premium and that's it.
I hope you can see how selling options is, what I consider, to be the best income-collecting strategy there is.
My team and I are currently on a 188-position winning streak. And we don't plan on it ending anytime soon...
To learn more about selling options and Retirement Trader, click here to watch a short presentation with our best offer.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
December 26, 2023