Building Wealth I had a great time yesterday teaching you how to create more income from stocks that you likely already own...
If you didn't see my presentation, you really missed out!
I walked attendees through a real trade... that you could put on and collect real income on, instantly. Everyone received the full details of this trade just for attending.
If you couldn't make it, I'll go over my notes from that trade in a moment.
But first, I want to explain why my top strategy to boost income in my own IRA is so important for you to learn how to do in your account today.
Right now, the market is the second or third-longest bull market in history... depending on what historian you consult. I think we still have room to go. But if this is the top and a bear market is coming, you must think about reducing your risk.
The strategy that I helped develop while working in the derivatives group at Goldman Sachs is my No. 1 way to produce income and protect myself... and you can use it, too.
One of two things is going to happen in the next six months to a year...
You use this strategy and stocks keep going up...
If this is the case, you created great income (often at double the rate of the usual annual dividend, and usually in just a few months), and you can wait until the stock you sold a call on to pull back a bit to rebuy it.
Or you can simply do a similar trade on a different stock. That's typically what we do in my Retirement Trader service... We find the best opportunities out there for this kind of strategy.
Or two, you could use this strategy and your stocks go down...
In that case, I guarantee that you'll be thankful that you can keep producing income from your stocks... you'll keep making money as they go down.
Remember, you get to keep the option premium from the call that you sold no matter what the stock does. And if the stock is trading below the call's strike price at expiration, then you've got extra spending money.
As you can see, it's a great way to make sure that you can keep creating income, even in a bear market.
Now, as a part of my weeklong training session... culminating in yesterday's main event... I asked you to submit stocks that you were interested in creating income from.
We got thousands of submissions, and we took the top 100 and put together a special report called "Generating Income From Nowhere on Our Readers' Top 100 Stocks."
The No. 1 request that folks wanted to know about was one of my favorite blue-chip stocks, Microsoft (Nasdaq: MSFT).
I like owning Microsoft because the company generates huge amounts of cash, enjoys a dominant position in its industry, trades at a reasonable valuation, and sits on a big pile of cash it can use to increase its dividend. This makes it a safe stock.
Say Microsoft is trading for $65 per share... That's about where it is today. If you had $6,500 to invest in this stock, you could buy about 100 shares.
Now, imagine another investor approaches you. He thinks Microsoft could stage a big rally in the next few months, which could take shares to $70. This investor tells you, "I'd love to buy your Microsoft shares for $6,750, or $67.50 per share. But not right now. If you agree to sell me your shares two months from now, in May, I'll pay you $100 now and then if I want to buy shares, another $6,750 in May."
He will pay us cash, up front, if we agree to sell him our Microsoft stake at $67.50 per share. (This future price is called the "strike price.") The $67.50 price represents a $2.50 profit on the shares. Add that to the $100 upfront payment (which is called a "premium") and that amounts to a 5.4% yield on our original outlay of $6,500. Our agreement lasts until May, or about two months from now (which we would call the "expiration month" of the contract).
Should we do it? Consider the two likely outcomes...
- Microsoft trades for more than $67.50 when our contract expires in May. We sell our shares for $67.50, which is a $2.50 gain on our shares, and pocket the $100 premium. We'd make 5.4% in about two months. That's more than double Microsoft's annual dividend.
- Microsoft does not trade up to $67.50 by May. The investor will not exercise his right to buy our shares, since he can get them cheaper on the open market. So the contract expires worthless, and we keep the $100 he paid us up front.
The premium we can collect for selling the option won't always be the same, so the return we earn will vary. We also have the normal risk of holding a stock. But this technique, selling options against stocks you own, can drastically increase your returns.
If we do this sort of "5%-plus in two months" trade six times a year, we collect more than a 30% annual income stream.
In terms of cold cash, we'd collect $600 a year in premiums on our initial outlay of $6,500... plus collect an additional $156 in annual dividends from owning the stock. That's an 11% yield in 12 months on one of the world's safest stocks.
That's how our technique works. We buy safe stocks... And then people pay us money for agreeing to sell our stocks for a profit.
It's that simple.
If you're not already using this strategy in your own accounts, you're missing out on potentially thousands of dollars in income every month. And with our track record at Retirement Trader, we've generated a 16.4% annual average return... at a 94% win rate.
That kind of track record... steady, regular outperformance vs. the market... is essentially unheard of in the newsletter business.
And today, I've put together a complete video training program... with five more videos on the way.
You've learned a lot about this strategy over the last week... And if you're ready to put it to work in your account, we're also making one of our best offers, ever...
- We've put together a full "trader's education" on this strategy... This includes videos and special reports walking you through the entire process... from getting broker approval to breaking down exactly how to execute this type of trade.
- We've included two years of Retirement Trader, with trade-by-trade recommendations so that you understand how to look for good income-producing opportunities. With at least two Retirement Trader recommendations every month, that's at least 25 different option trades in two years. (And if history is any guide, it'll be closer to 50 different trades... I love over-delivering.)
- And we're also giving away 100 additional trades that you can make today from the list of reader-submitted stocks. These aren't all recommendations – for example, I don't recommend this strategy on a crazy stock like Tesla (TSLA) – but each one is a real trade that can be made. Expect this report to be published on Friday.
Again, this is the full package. After two years of learning and reading Retirement Trader, you'll be ready to use this professional strategy on your own. Of course, we'd like you to keep subscribing. But the point is, you won't have to.
You'll know how to squeeze extra income out of stocks that you already own. This is your way of receiving tuition for a lifetime of investing education... from a guy who's been there and done it all.
To learn more about this strategy, click here.
I hope you join us at Retirement Trader and start making a whole lot more income the months to come.
What We're Reading...
- Something different: The Monopoly board game welcomes the T-Rex, duck, and penguin.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Retirement Millionaire Daily Research Team
March 23, 2017
P.S. I almost forgot... I'm also throwing in two years of my high-end income service, Income Intelligence. Each month we share insights into the best income investments, the state of the market, and check in on inflation, yields, and asset classes... It's yours free for learning this powerful strategy. Click here for the full details.