Building Wealth If you can understand real estate, you can understand the greatest income-producing tool for retirees.
I've shown thousands of my Retirement Trader readers how to understand this tool... These subscribers are regular investors (just like you). And they're using this tool to pull thousands of dollars out of the market every month.
You can do the same...
This strategy starts with the familiar real estate idea of collecting rent.
It involves one of the most powerful – and misunderstood – financial tools ever created: stock options.
When most folks hear the words "stock options," they think of risky bets on volatile moves in the stock market.
Nothing could be further from the truth.
A stock option is simply a contract between two people. One type of option is called a "call option"...
- The person who buys a call has the right – but not the obligation – to buy a stock at a given price in a given time period.
- The person who sells a call has the obligation to sell a stock at a given price in a given time period.
Done properly, selling call options is one of the greatest moneymaking strategies ever created. And it's simple once you get the hang of it.
Essentially, you can think of it as a "stock market landlord."
Conventional landlords collect regular income on properties they own. It's a time-tested plan for getting a good double-digit annual yield on your money. You also collect income on properties you own.
Except these properties are in the stock market. You collect income while you own them, and you have the potential to get bought out if prices rise.
Unlike conventional real estate investing, this type of investing doesn't involve bank loans, fixing toilets, or dealing with tenants at 2 a.m.
Here's how it works...
After you buy a stock, you can enter the options market and sell someone the right to buy your stock at a higher price in the future. In return for agreeing to sell your stock, you collect cash up front.
Using options this way has nothing to do with the risky "all or nothing" options strategies many people use. This is a very safe strategy. It's called "selling covered calls."
This amounts to buying shares, then selling someone else the right to buy the shares from you at a higher price. I know it might sound like a strange transaction. But it happens millions of times a day...
Let me walk you through some numbers so you can see how useful a tool it is if you're looking for safe income...
In August 2021, I told my readers about an opportunity to become a "stock market landlord" with shares of one of the largest oil companies in the world: Shell. At the time, you could buy Shell for about $40 per share. Let's say you bought 100 shares at the time, a total of $4,000.
Right after buying your shares, you were able to sell someone the right to buy your shares from you for $37.50 per share any time over the next two months. (In other words, you sold a covered call... A "covered call" means you own shares of the stock you sold a call for.) You collected $3.17 per share ($317 for all 100 shares) for selling that right. That meant you could make a quick and safe 1.7% gain in under two months.
When October rolled around, I told readers...
Our bet on oil and Shell couldn't have been timed any better. We sold options on Shell trade in late August and the price of oil has gone from $68 a barrel to $80 a barrel. Shell has soared as a result.
That meant that our covered calls closed in October for maximum profits. Our shares were called away, meaning we sold our shares at the agreed-upon price – freeing up capital to earn even more income.
But here's the beauty of selling covered calls...
Even if the price of oil hadn't soared, which helped push Shell shares higher, we could have continued to make money selling covered calls on our shares. If you had put on this trade every two months for a year, you could have earned 13.3% annualized.
On a $50,000 stake, that's about $6,650 each year. (Good luck finding a $50,000 house to rent out and make that much each year.) More important, we're not tied down to one building like we would be with a real estate investment...
Also, we sell options on what I call "sleep well at night" ("SWAN") stocks. SWAN stocks are leading companies and businesses that held up in the latest recession and are improving as the global economy putters along. They have strong balance sheets, good cash flows, and long histories of rewarding shareholders through dividends and share buybacks.
Of course, this strategy takes a little bit more work than buying stocks. But as many of my readers have discovered, it's simple to learn... and simple to use once you get the hang of it.
Becoming a "stock market landlord" is well worth the extra effort.
And while options seem scary for even seasoned investors... they work.
Last month, we closed our 140th straight winning trade. And I was able to do all this over the past two and a half years, during a global pandemic, and even as the bull market turned bear.
My options strategy works in up, down, or flat markets. It's a way to earn steady, safe income that can put a lot more money in your pocket for retirement and the things you enjoy...
And this week only, to celebrate this winning streak, my publisher has agreed to extend the best offer we've ever made for new Retirement Trader subscribers...
To learn more about this special celebratory offer and how you could potentially add thousands more each month to your nest egg, click here.
What We're Reading...
- How we've managed to generate gains for 900 days.
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Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
November 3, 2022