A good friend of mine recently read an excerpt from
's Chesley Spencer stating, "Buy and hold may not be dead, but
it's no longer the straightforward process it used to be. It is,
in fact, a brave new world - with short-term holdings, hedging
and derivatives becoming ever more a part of the individual
After hearing Mr. Spencer's wise words I decided it was
important to present my loyal readers with the following
My 2014 Gameplan: Earn 5% a Month Even When the
Yes, alternative investments, more specifically options may
seem like voodoo to the uninitiated. But given the fact that you
can make money in up, down, or stagnant markets why would you not
invest your time to learn what is becoming the wave of the future
in the investment world?
Let's face it: When all you have is a hammer, all you're going
to see is nails.
The market moves, up, down and sideways, yet most investors
limit themselves to the mercy of Mr. Market and only make money
when the market moves in one direction - higher.
And that's where I come in….
By implementing the following
in your overall portfolio plan, you will be able to make money in
an up, down or sideways market.
The strategy is known as a vertical call spread or
bear call spread
It's a type of options strategy used when a decline or at
least limited upside in the price of a stock or
For example, let's assume that the
S&P 500 (
is trading at $182.00 and you expect there is limited upside over
the next 30-60 days. As a result, you have decided to use a bear
By definition, a bear call spread is achieved by selling call
options at a specified price while also buying the same number of
calls, but at a higher strike price. For instance, with SPY
trading at $182, an options investor would sell the 187 strike
for $0.75 and buy the 189 strike for $0.40. If you subtract the
two you end up with a total of $0.35, which equates to a 21.2%
return over 37 days.
Now if you look at the strike sold at 187, the Probability of
Success (Prob. OTM) is 79.56%. That means that there is a 79.56%
chance SPY remains below $187 at the time of March expiration in
37 days. So basically, as long as SPY stays below $187 over the
next 37 days, you will make 21.2% and the chance of that
happening is 79.56%. Are you starting to see why so many
professional options investors use this strategy as their bread
and butter strategy?
If you would like to learn how I use this strategy among
several others, check out my
webinar from Thursday
. I go over in great detail how I use the options strategies to
make a consistent monthly income. I realize that for some of you
these concepts are completely foreign, but I can promise you that
once you begin learning about how options can work to your
advantage, you will never go back to just the buy-and-hold
There's just too much opportunity to put your hard-earned
money to work in more effective ways. Whether you want to provide
another source of monthly income or just protect the hard-earned
profits in your buy-and-hold portfolio, options are the ticket. I
hope you can join me in what is becoming the fastest-growing
sector in the investment world.