Do you realize that you can actually be paid to buy stocks at
the price of your choosing?
Yes, that's correct. Someone will pay you cash today for your
promise to buy any stocks you want at a cheaper price than where
it is currently trading.
It's simple. It's real. And it's totally legitimate. And for
serious investors . . . it's a necessity.
For some reason, however, the old regime of the financial
industry would have you think otherwise.
But do we really care what they think? They have led us astray
for years, so why should we continue to listen to their archaic
The only requirements for this strategy is that you find a
stock or ETF that you want to own, come up with a price that
you're willing to pay, place the trade and collect your
Yes, it is that simple.
As a professional options trader for roughly 15 years, I have
discovered that most options strategies are best within certain
types of market environments. However, this strategy - known as a
favorite among options professionals - works well in any market
environment - bullish, bearish or neutral. So what is this
strategy? Selling puts, or put option selling. The semantics
don't really matter.
Selling puts is the best way to obtain the stock or ETF you
have been eyeing for a much lower price than where it's currently
When a stock or ETF's price is inflated, most investors enter
a limit-buy order for the underlying at a lower price. Yes, they
sit and wait and wait . . . and wait some more. In most
cases this goes on for months with nothing happening other than
lost opportunity costs. In fact, it's been shown that more than
99% of all investors do it this way.
But by selling puts on a stock that you wish to hold in your
portfolio you could be collecting income, thereby lowering the
cost basis of the stock even further.
We've been doing just that in our
High Yield Trader
portfolio for big gains. I'll get to that in a sec.
Here's how it works:
Selling a put option
means that you are obligated to buy the 100 shares at the strike
price if the buyer so chooses prior to the expiration date. This,
of course, won't happen until the stock price drops below the
This is where you -- the put option seller -- come in. Since
you want to own the shares (albeit at a lower price), you sell a
put option and just wait until options expiration.
If the underlying issue closes above your chosen price (the
strike price), the put expires worthless and you get to keep the
entire premium collected at the outset.
If the underlying issue closes below the strike price, you
will be put (assigned) the stock or ETF that you wanted. In other
words, you will be obligated to buy the shares at the strike
price. You now own the stock you wanted … at the lower price you
were willing to pay.
Just think how much you could reduce your cost basis if you
did this for months.
Everyone knows you're supposed to buy low and sell high. This
advice is so common and so basic.
And yet, almost no one talks about how to buy low - let alone
how to sell high.
Here's how selling puts works - and we've used this strategy
to collect 23.3% in income on an ETF that has fallen 13.3%.
Back in April we were eyeing
Market Vectors Gold Miners ETF
), but at more than $28, the ETF was outside of what we wanted to
pay. Our price was $20. We wanted to own 100 shares of the ETF at
$20 for a total cost of $2,000.
Under normal circumstances, while we waited to hopefully get
in at $20, our capital would sit idly on the sidelines making
next to nothing. But if we sold puts at the strike price ($20 in
this case) of our choosing - we get paid while we wait.
So we did just that. We sold a put option with a strike price
of $20 that expired in one month for $0.33, or $33 per contract
(one option contract = 100 shares), or a 6.04% return for 30
days. We've done a similar transaction four additional times over
the past six months for a total return of 23.6%.
And you can do this into perpetuity, assuming that the stock
price remains above your strike price. Of course, if you end up
buying the shares at the strike price, you own the ETF, which is
what you wanted in the first place.
This is why professionals prefer to sell puts. They know if
done correctly, the strategy has the potential to own a stock for
next to nothing.
Please, if you have any questions on how to sell puts do not
hesitate to email me at
. Once you learn how simple and powerful the strategy is you will
never bother buying a stock or ETF in the traditional manner