Building Wealth Right now, investors who understand a specific income-producing tool are pulling thousands of dollars out of the market...
To join them, you must be willing to learn something a little bit new... and take a small step out of your comfort zone...
This strategy 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.
Used properly, options are far safer than simply buying stocks at regular market prices – something that you probably do on a monthly or weekly basis.
A stock option is simply a contract between two people. For example, take a common type of option 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.
These distinctions are important. If you can, you want to be an options seller.
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 if you are collecting income from assets that you own, with the potential to get bought out if prices rise.
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 certain 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.
Let me walk you through some real numbers, so you can see how useful a tool it is if you're looking for safe income...
In a December issue of my Retirement Trader service, I detailed a trade we could put on that would benefit no matter which way the "Trump Trade" went. Here's what I said:
Maybe the Trump Trade will reverse, and health care will rise. Or maybe the Trump Trade will keep some momentum going. In that case, consumers will spend more.
We have a stock that'll benefit either way.
The stock that I recommended was health care and consumer-product giant Johnson & Johnson (JNJ). It traded for about $112 a share. Let's say you bought 100 shares at the time, for a total of $11,200.
Right after buying your shares, you could have sold someone the right to buy your shares from you for $110 per share any time over the next three months. You would have collected $4.25 per share ($425 per contract) for selling that right. And this $425 payment represented an instant 3.8% yield on your investment ($425 / $11,200 = 3.8%).
By the time February rolled around, your JNJ shares would have gotten called away for a 2.5% gain – or 13.9% annualized.
Here's the kicker... If you had simply held JNJ shares, you would only get about a 2.5% dividend payment in a year. With this method, you got it in less than three months.
And the best part is that you can do this type of trade consistently... making regular income that is way higher than dividend payments. More important, we only trade safe stocks... what I call "sleep well at night" stocks ("SWAN" stocks).
SWAN stocks are 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. These companies are often leaders in their industries.
Think of businesses like Coca-Cola (KO), Visa (V), Target (TGT), Apple (AAPL), Gilead (GILD), and Intel (INTC). If you own these stocks... or stocks like them... you can use this strategy to boost your income, often by double digits.
We're collecting regular cash payments by owning great businesses and offering to let other investors buy them at prices that we set...
Of course, this strategy takes a little bit more work than what you might be used to... But as many of my readers have discovered, it's simple to learn... and simple to use once you get the hang of it.
To learn more about this strategy... and how to join my subscribers who are using it to pull out average double-digit income on every trade we make... click here.
What We're Reading...
- Did you miss it? Read part one of my options series in the Stansberry Digest.
- And part three is here, with details on how to get paid again and again on the exact same stock. (Part four is out tonight!)
- Something different: What happens if a nuclear bomb goes off in Manhattan?
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Retirement Millionaire Daily Research Team
Baltimore, Maryland
March 21, 2017