We are adding an “income trading” component, as well as LIVE broadcasts during market hours.
Hello traders and welcome to new members.
I wanted to take a few minutes to thank all of you, for your continued support and also highlight one of the “new” features that will increase our value going forward.
This is perfect for those of you who dream of a way to escape the grind of a 9 to 5 job. It’s also good for seniors, retirees or someone who has recently been “sacked”, or “laid off” from their job.
I’ve used this method of extracting cash from the markets for many years, so its no surprise that my mom’s portfolio is modeled around this approach.
The idea is simple, as a stock holder, we have many benefits, aside from just buying the shares and hoping the stock moves in the right direction immediately.
Since the market is random, your probabilities are 50/50 the stock will go up or down once you click enter. Of course, using a strategy based approach, like we emphasize herein, we attempt to increase those odds. More on that later.
We can also……
- Buy stocks that pay handsome dividends and…….
- Sell covered options positions against the shares in our portfolio.
With dividend stocks, we enter with the idea of staggering ownership, so that dividends are paid and collected every month. For example, we might buy the following stocks. This is a crude example, so just go with the flow. 🙂
My criteria is straight forward.
- My goal is to own 1000 shares in each company.
- The company must meet the “quality” test. Think IBD.
- Buy/hold stocks trading $15.00 – 50.00 per share,
- Stocks should be in a bullish trend (think 10e/STO/MACD setup)
- Stocks should payout $1.00 or better each quarter.
- Not all will pay this much, but I seek the majority that will
- Stocks pay on consecutive months, 4 times a year.
- I want to vary the sectors, so that I have a mix of stocks from different industry groups.
- In other words, I want a balanced portfolio.
- Finally, we want the major indices trending higher
Here’s where the fun begins.
Let’s simplify the concept by using 1000 shares.
Depending on your circumstances, you will need to scale this up or down) Using the criteria above, my goals are:
Get paid a recurring cash amount, every month.
Minimum $1000 x the number of companies paying this month.
In January, my example payout is $1000 x 4, if each company pays a $1.00 quarterly dividend. Obviously this takes some work. That’s why I am here. 🙂
Now, if we hold these shares, why not make more money?
Since these are income trades, I am only concerned with the stock remaining in an uptrend and receiving my dividend payments, once a quarter.
If I sell covered calls on my position, and select stocks that pay a good premium, I could receive immediate cash payment for the promise to deliver my shares, if they are exercised.
Example:
Let’s take Best Buy (BBY) close FRI 45.24
1000 shares: Cash investment $45,240.00
Scale according to your circumstances.
Sell 10 covered calls
March WK2 1.80 = $1800 premium received
My cost basis = $43.44 per share. 45.24 – 1.80 = 43.44
If the stock declines to 43.44, (-3.97%) my covered call premium makes me even. I am income trading so I am not so concerned about this. If I were, I can always buy OTM puts for insurance and still do what I am doing.
This is why we trade stocks in an uptrend. We want to get taken out by design. If we do get assigned, we just buy the stock back and repeat the process. Each time we do this our cost basis continues to drop. If the stock stays flat for 1-2 weeks theta kicks in and we make the dividend and the premium with no worry about assignment. We just keep repeating the process.
Quarterly Dividend payout 1.12 x 1000 shares = $1120
Therefore……
This quarter I own 1000 shares of BBY. Remember, our goal is to have multiple stocks like this, so that each month, throughout the year we have recurring income.
I know the thoughts that are going through your mind.
I’ve been there. It’s one of the reasons I did my research and made these goals in the first place.
THE FUNNY THING IS, all you need is a cellphone. You could be doing this from a beach in Aruba, Hawaii or my favorite, the Seychelles.
Ok, back to my example.
If the BBY position appreciates to 46.00 (46.00 – 45.24 = 0.76)
My gain (0.76) x 1000 shares of BBY stock = 760.00
Premium received for my covered calls = 1800.00
Total received for the month
- Dividend = $1120 (timing is important. we want to own at ex-div & payout)
- Premium = $1800 (cash received for selling the covered calls)
- Stock gain = $760 (self explanatory)
- $3680 is received using this example.
Obviously, there are variables, but my goal has always been, to work this scenario repeatedly. Some months are better than others. Sometimes we have shares called away at higher prices than we bought them. That’s ok.
The payout varies little, especially if we are using dividend stocks. Even if the stock declines a bit, we can continue to sell covered calls on rebounds to bring down our cost basis over time.
Now obviously, there are details that need to be discussed. We will. You just need to stick around in the long run, for the LIVE broadcasts, videos and podcasts that will cover all the details. Your concerns and “what if” questions that arise, will also be discussed.
I’ll talk more about this strategy in the future. I merely wanted to share with you how remaining a subscriber will benefit you in the years to come. The knowledge you will learn from my experience and that of the professional traders in the room, will enable you to accomplish your goals and aspirations.
If you use this technique with the bulk of your portfolio, you can trade, with your remaining funds, with the knowledge that your monthly income is met.
I’d like to leave you with this quote,
“Though no one can go back and make a brand-new start, anyone can start from now and make a brand-new ending” – Carl Bard
When rates go up, your current rate will never change. Once the word is out, more will join.
Hell, they already are.
Welcome to the new members, as we start year two of our service.
Happy Trading
Vinny