Every month, thousands of traders show up for my LIVE webinars.
During these webinars, I always do a couple poll questions. And one question I often ask is:
What is the #1 reason you are joining us today?
Over 86% of our readers stated they wanted to “become a better trader” or “learn a new trading strategy.”
Do you want to become a better trader? Click here right now to access my EXCLUSIVE Options Boot Camp - 100% FREE.
My goal is to help YOU become a better trader. And I do this in a variety of ways including in-depth articles, videos and our crowd-favorite educational webinars. But we’ve always wanted to do something a little more in-depth… with a boot camp training.
It’s time to dedicate a few solid weeks to taking that deep dive into some of the best options strategies the investment world has to offer. The same strategies that options professional use.
Inside this LIVE Options Boot Camp, we plan to cover a variety of options strategies and my high-probability approach.
Specifically, we'll teach you the following strategies:
· Selling puts
· Covered calls
· Poor man’s covered calls
· Bear call spreads
· Bull put spreads
· Weekly options
· Iron condors.
You'll discover the basics of the strategy and my approach. Plus, I plan to reveal some real-time trades as my examples. Examples, that we plan to follow up with and discuss in the boot-camp live training session.
Hopefully, by the end of our version of a boot camp, you will have the tools necessary to trade options successfully over the long-term.
One Simple Trading Strategy... Could be Perfect for YOU
So, without delay, let’s talk about one of an easy to use and effective options strategy. An options strategy that offers the highest-probability of success of any strategy, stock or options, in the investment universe. An options strategy that allows investors to collect a consistent stream of income. The strategy…selling puts.
Here’s how selling puts works – and how using this strategy can boost your income while you wait for the price you want to pay on a given asset.
For instance, say you want to invest in the energy sector. You aren’t sure about which company to choose so you’ve decided to buy the SPDR S&P Oil and Gas Explorers and Producers (NYSE: XOP).
The energy ETF is currently trading for roughly $31, but you feel the price has been beaten down enough and a bounce is looming, especially if you have long-term expectations. Rather than set a limit price of $29, $2 below the current price of the ETF, you can sell puts at your “limit price” and boost your income while you wait for the ETF to hit your price of $29.
You could sell options premium in November for at least $0.83, or $83 per contract. That’s a 2.9% gain over 70 days or 14.5% annually. You can use the put premium to lower the cost basis of XOP or simply use it as income... your choice.
A quick aside: Typically, when you have a wide bid-ask spread you want to sell your option of choice halfway between the bid-ask spread. This alone will increase your return significantly over the long term.
In comparison, say you wanted to purchase the 100 shares of the ETF at $29 for a total capital outlay of $2,900. So, you decide to set a limit at $29 and wait and wait for the ETF to hopefully hit your limit price.
But if you sell puts at the strike price of your own choosing – you get paid.
I am always befuddled by the fact that most investors choose not to sell puts, particularly in this situation.
You are willing to buy the ETF at $29, so why not collect some premium and lower your cost basis even further by selling a few puts? In this case, you would sell one put at the November 29 strike because you are willing to own 100 shares of the stock at $29. Remember, one options contract equals 100 shares of stock.
So again, we could sell 1 XOP November 29 puts for roughly $0.83 or $83 per contact over the next 70 days. If XOP falls below your strike of $29 at expiration you would be assigned the stock at $29 share, 5.7% lower than the ETF’s current price of $30.76.
Additionally, you can subtract your collected premium of $83 to decrease your cost basis even further. So, in reality you actually own the ETF for $28.17 ($29 – $0.83) . . . a savings of 8.4% from the current price of $30.76.
And you can keep selling put options, thereby lowering your cost basis further, until the ETF hits your stated price. Again, if you did this over the course of a year, you could sell puts on XOP approximately five times for a total of $4.15 or $415 (based on one contract).
Selling Put Options: Harness the Power
Annualized, that is an 14.5% return on the $2,900. It would lower our cost basis from $29 to $24.85.
Now you can start to see the true power of selling put options.
I have to urge caution – and point out the obvious: you should never sell puts on a stock that you don't want to own at that strike price. That’s how most people get in trouble – they only pay attention to the income – forgetting that they CAN and eventually will get put to the shares.
Now . . . knowing that you are able to lower the cost basis of a stock that you want to own anyway, why would you choose to do things differently?
My Options Boot Camp is NOW OPEN.
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