I’m no salesman.
I spend most of my time writing to you about your health, your wealth, and how to live a better retirement.
That’s why I don’t want to try to “sell you” on my new research advisory, Advanced Options.
Instead, I’m going to walk you through a hypothetical trade that we might make in Advanced Options to show you how powerful the strategy can be. Then, I’ll let you be the judge on if this service makes sense for you or not…
Now, the trade I’m about to describe is not an actual trade recommendation.
As I’ve mentioned, my strategy with Advanced Options is to take the trades from Stansberry Research analysts like myself, Dr. Steve Sjuggerud, and Porter Stansberry, and then show you how to potentially “boost” your gains up to triple-digit returns.
So I don’t want to give away one of the regular recommendations that we’ve made in our paid products.
Instead, I’ll walk you through an options trade on Coca-Cola (KO) using modeled prices that should be about what you can see in your brokerage account…
Coca-Cola is what we call a “World Dominating Dividend Grower.” It consistently churns out high revenues and profits year after year. And it always manages to increase its annual dividend payment… as it’s done for more than 50 years.
Typically, its share price is not volatile… It trades within a narrow range throughout the year.
That makes it a prime candidate for one of the two main trading strategies we use in Advanced Options. For Coca-Cola, we’d want to use something called a “calendar spread.” A calendar spread makes money from the passage of time, so we want to use it on stocks that don’t have wild price swings. That’s Coca-Cola.
Shares of Coca-Cola are trading around $49.25 as I write. For this trade, we’d want to make a bet that shares continue to hang around $50 by January 18. Basically, the bet is that the stock won’t move much.
What we’ll do is sell an option that expires in January and buy another option that expires in May. Both options have the same strike price of $50. It will cost us only $93 to make this trade.
That $93 is the most you can lose, no matter what happens to Coca-Cola. That’s one reason why many folks like this type of trading… you’ll always know exactly how much you have at risk.
After you make the trade, you sit back, relax, let time do its work, and check back in on this trade in a couple weeks.
Let’s fast forward to January 18… and let’s imagine that Coca-Cola has barely moved. It’s now at $49.75, up only $0.50.
But when we check on the price of our trade or “spread,” it’s now worth about $162. The stock increased 1%… our spread shot up nearly 75%!
Without giving away our secret sauce, we take advantage of time. We know that the January expiring option we sold will lose its value faster than the May expiring option we bought.
This phenomenon is known as an option’s “time decay.” Shorter-dated options lose value faster than longer-dated options. That’s why a calendar spread is one of the most profitable trading strategies you’ll ever find.
Getting back to our Coca-Cola trade… The January option we sold will be worth $0 by the January expiration date. That’s because Coca-Cola shares are trading below the strike price and there’s no time value left in the option. This is a tricky topic to make sure you understand, but we cover it in detail in our Advanced Options Master Course videos.
Meanwhile, the other option hasn’t lost all its value. There’s still a chance for the stock to move by May, so it’s still worth quite a bit. Our model estimates it will be worth $162 by January if Coca-Cola stock doesn’t move much.
We would close the trade in January. And the $93 we put up initially turned into $162… for a nearly 75% return. All in less than 40 days.
I don’t want you to put on this trade today. Instead, I’ll be sending out our first Advanced Options trade next Monday for all our new charter members. That will be the trade I want you to make if you’re joining us.
But I do hope that this example gives you an idea of the power of our Advanced Options strategy.
Imagine a stock that never moves. You can make 50%-100% consistently every 40 days, and that $93 you put up can turn into $1,000 or more after one year. All because we’re taking advantage of the strange way options lose their value!
Using Advanced Options is fun, it takes a small amount of money to make these bets, and I believe we have the best options-education course you’ll ever find.
But by this Friday at midnight, the special charter member discount for Advanced Options is ending. So if you’re interested, I hope you consider joining us for what I believe will be an amazing year of trading.
What We’re Reading…
- Something different: Amazon’s Alexa can now help you monitor your blood pressure.
Here’s to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
December 12, 2018