How I Made A 25% Gain In Two Months -- And You Can Too

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Every investor wants to generate more income -- and quicker. But how do you accomplish this without taking on extra risk?

There's a simple solution, but I bet only 1% of individual investors are doing it right now.

It is not a complex trading strategy that involves a lot of time. But, then again, I'm also not simply buying and selling stocks either. My strategy is unique.

Even Barron's says, "One solution that deserves serious study is offsetting the expected lack of stock-investment returns with [this] strategy that, studies have shown, outperforms buy-and-hold investing."

My strategy is a two-part approach based on options -- but not the tricky kind.

Here's how the first part works.

Let's say you own shares of Apple, and it's trading for $100.

You think Apple is a good, solid company that won't necessarily skyrocket in the near term, but should reward you over the long haul.

Your friend, however, thinks Apple's share price is about to take off. He thinks that over the next few months it's going to jump all the way to $200.

So he comes to you with a proposal.

He says he'll pay you $500 today... if you agree to sell him your shares of Apple if its share price reaches $120 over the next two months.

Let me repeat that... He'll pay you $500 today if you'll sell him your shares once the price -- which is now at $100 -- reaches $120. That would net you a 20% gain in two months.

This sounds like a pretty good deal to you. After all, you want $500 today. And if the stock goes up to $120 and you have to sell your shares to him, that would give you a 20% capital gain. So you agree to his offer, and he hands you $500.

Then you start to watch the stock. Over the next two months, Apple's share price begins to rise. Before the two months is up, it hits $120. That means you have to sell your shares.

So you and your friend meet, and you fulfill your end of the bargain by selling him your shares for $120. With the sale, you get a 20% return in capital gains -- in addition to the $500 your friend already gave.

That, in a nutshell, is how my strategy -- selling covered calls -- works.

The buyer believes the stock will skyrocket over the next couple months. He believes this so strongly he's willing to pay you -- the seller -- a cash premium upfront to make this bet.

You both agree that if the share price hits a certain price -- what's known as the "strike price" -- by a certain date -- called the "expiration date" -- you will sell him your shares. But you get to keep your cash premium... and make some money from capital gains.

That's all there is to it. Pretty simple, right?

Now let's look at how this worked using a past trade readers of my premium newsletter, Maximum Income , executed on the electronics retailer Conn's (NYSE: CONN ) .

On Feb. 20, 2014, I sent an urgent message to readers, telling them they could capture $1,600 in options payments from 1,000 shares.

Then, about four weeks later, I followed that up with a second alert. Investors who used my technique captured an additional $1,050.

As I said, this is actual cash deposited into your account. Whether the share price goes up or down, you get to keep this money.

In Conn's case, the share price went up. Way up. Over the next two months, the shares gained steadily -- investors could have earned capital gains of $5,400.

Payments Earned

In total, that's $8,050 from just $32,200 invested -- a 25% gain in a matter of weeks, or 209% annualized.

And even if shares of the stock didn't gain a dime, you'd still have made an extra $2,650 in a very short amount of time.

Of course, every trade works out differently, but these results show how my strategy trumps traditional "buy-and-hold" investing. It would have been impossible to come even close to those returns by investing the way 99% of investors do. But by simply putting in a little time and effort to learn about a new way to earn income, my Maximum Income readers were able to pocket thousands of extra dollars.

What's more, I've been able to use this technique over and over again to make money, even with stocks that don't move higher.

So if you're looking for extra spending money or if you simply want to grow your nest egg quicker, then my options-for-income strategy is for you. To learn how to access to my latest trade, go here .

P.S. -- In next week's issue I will cover the second part of my approach. As you'll see, the second step is what allows me to know what stocks to focus on. But if you don't want to wait until next week to start cashing in on my strategy, you can learn everything you need to know in my special report, Using Options Payments to Earn Thousands in Monthly Income . To get this report sent to your inbox immediately follow this link .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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