| Fellow Investor,
If you're like me, you love earning market–beating returns on your investments while generating a tidy stream of income along the way. That's exactly what I've been doing for myself and for my Forbes Premium Income Report subscribers since my advisory launched just over a year ago.
Look at how we stack up: Forbes Premium Income Report → Up 36.5%
S&P 500 → Up 12.5% The results have exceeded our highest expectations: we've made money on 95.5% of all trades! Our returns are nearly TRIPLE the S&P 500 for the same period. Not only that, we achieved this market–beating performance with less risk than owning the overall market. Plus, we do the work for you.
How? We sell options for income on stocks that we already own, or wouldn't mind owning at the right price. Like Warren Buffett, I detest losing money, so I always like putting the odds in my favor. Selling options is one of the most reliable ways to do this because most options expire worthless, and each time they do the seller keeps the cash. Selling options puts money into your pocket immediately and is an excellent source of yield. HERE'S HOW IT WORKS Every Tuesday and Thursday I recommend two trades. Trade length is usually 30–60 days. Cash gets freed up after the third Friday of every month as options expire and we immediately put our newly–minted profits back to work into new trades. I will not choose any trade that doesn't look like it can reasonably make us 15% annualized.
I recommend three types of trades: BUY WRITES, COVERED CALLS, and PUT SALES. BUY WRITES ARE BEAUTIFUL A buy write is when you buy a stock and simultaneously sell call options on it, which requires you to sell at the strike price if the stock trades above that price at expiration. The premium you collect reduces your cost basis and boosts your yield. Facebook is a nice example of how a buy write can produce big gains. On February 17, I recommended buying 100 shares of Facebook (FB) at $76.54, and selling one $77.50 call for $1.75. Facebook shares held above the $77.50 strike price, so we were called away for a $271 profit, or 3.62% for the one–month holding period. Do that twelve times a year and you're up 42.7%. TAKE SMART RISKS SELLING PUTS If we don't originally buy the stock and sell calls on it, the other way that we get into a stock is by selling put options, which pays us up front for taking on the obligation to buy the stock at the strike price if it trades below the strike price at expiration. This is a great way to earn income all day long if you think a stock has limited downside and you're willing to buy it at a lower price than it currently trades.
Last September, we sold $51 Wells Fargo (WFC) puts that were less than one month from expiration. When WFC closed below $51 on October 18, we bought 100 shares at $51, but our cost basis was $50.38 reflecting the $0.62 premium we were paid for the puts. Since October, we pocketed $0.70 in dividends, and we sold two rounds of calls for another $2 in premium. We were called for a 10.1% six–month return away when WFC closed above the $52.50 strike price of the calls that expired March.
Also in January, we sold $45 February puts on Plains All American Pipeline (PAA) and walked away one month later with a 22% annualized profit when the puts expired worthless. Refiners provided plenty of opportunity for profit, too. We earned 38.7% annualized for a buy write on Valero Energy (VLO) that had us holding the stock for eight weeks and getting called away on March 20.
We also had a nice ride on American Railcar Industries (ARII). Last April we did a buy write, buying the stock at $68 and selling the $75 June calls for $1.70. Those calls expired worthless and ARII rallied after expiration. It's nice when that happens. We were called away when another $75 call we had sold expired in–the–money on the third Friday in September, booking a 16.7% five–month return…and getting us out of the stock before it went on to fall 40% over the next four months!
Earlier this year on January 6, it looked like Occidental Petroleum (OXY) had stabilized after a brutal fall, making it a good put–selling candidate. With OXY just below $78, we collected $225 selling one contract of the $75 puts that expired one month later on February 20. OXY held above $75 and we kept the cash for a 3.1% six–week profit. That's 25.1% annualized.
Another recent example of cashing in on put selling is Twitter. On February 10 with Twitter pulling back after a 20% run, I thought the decline had about run its course. With Twitter at $46, I was comfortable that it would hold above $44 for the next six weeks. I recommended selling one contract of the $44 puts that expired on March 20 for $1.44. Because each options contract covers 100 shares, we picked up $144 in premium from selling the puts. Twitter resumed its uptrend and we kept the $144, booking a 3.38% return over a 38–day period. That works out to 32.5% annualized.
My strategy has been so effective that my readers have racked up these gains in a matter of days: - 38.9% profit in 32 days from Sunesis Pharmacuticals
- 5.7% profit in 16 days from Ebix Inc.
- 7.4% profit in 25 days from Quality Systems Inc.
- 6.3% profit in 23 days from GNC Holdings Inc.
- 9.7% profit in 36 days from Rite Aid Corporation
- 7.7% profit in 30 days from Best Buy Co., Inc.
- 13.2% profit in 51 days from Abercrombie & Fitch Co.
- 8.5% profit in 57 days from Janus Capital Group, Inc.
- 8.5% profit in 37 days from Alliance Resource Partners LP
- 10.8% profit in 51 days from Conns Inc.
- 9.1% profit in 44 days from American Railcar Industries, Inc.
- 7.0% profit in 39 days from SolarCity Corporation
- 11.2% profit in 65 days from Corning Inc.
CASH KEEPS ON FLOWING WITH COVERED CALLS Sometimes we end up owning stocks after the options expire. When that happens we write "covered calls" on the underlying stock, and keep doing it until we get called away. Each time you sell more calls you lower your cost basis in the stock, so when you do eventually sell you do so quite profitably.
Last month we sold new covered calls on two stocks that just keep on giving: DISH Network and Vodafone, both of them great examples of how selling covered calls can really hammer down your cost basis.
Our first trade in Dish Network (DISH) was a buy write for 100 shares on April 1, 2014, and we've sold three more cycles of calls over the past year. Thanks to the significant premium we put into our pockets each time we sold covered calls, our cost basis in DISH is $56.11. With the stock above $72.50, we could have cashed out for a very respectable 23% one-year return. Instead, we picked up another $210 by selling one contract of $73 calls that expire on April 24. This will bring our cost basis in DISH down to $54.01. Getting called away later this month would hardly be horrible news, since selling at $73 would net us $1,899 for a 35% one–year return.
Most of our trades involve stocks with generous dividend yields, which can really help to turbo–boost yield and total return. Vodafone (VOD) yields 3.8% on our $29.04 cost. We've written three rounds of covered calls on Vodafone, and selling the stock would have netted us a nice 12% six–month return, but I want to stick around for a big dividend coming in June. Selling two $34 calls that expire on July 17 brought in another $240 and pays us to wait. If we're called away in July at $34, we'll enjoy a 20% total return for 10 months of holding the stock, plus an additional 4% from the June dividend.
Another stock that has padded our wallets very well is Aetna (AET). We met Aetna in our very first edition of Forbes Premium Income Report on March 20, 2014, buying 100 shares for $75.96 and picking up $1.10 for selling $80 calls that expired in May. After selling three more rounds of calls we reduced our cost basis in AET down to $70.86 and we collected $0.70 in dividends before getting called away in November for a seven–month total return of 15.5%, or 26.7% annualized.
Returns on an annualized basis when you get called away are quite rewarding as you can see from some recent expirations: ABB (+71.9%), CSCO (+41.5%), ORCL (+40.8%), RAD (+46.3%), TEP (+65.4%), K (+29.5%), BX (+26.3%) For the next 48 hours only, you can put
Forbes Premium Income to work for you
at a 60% discount The past 13 months of experience and returns for Forbes Premium Income Report shows that investors do not need to sacrifice total return for above–average yields. On the contrary, our readers can have it all—market beating returns with abundant portfolio income and moderate risk.
The reason that most investors don't earn these types of returns is because it takes a lot of work, and most people are too busy to dive in deeply and uncover the golden opportunities that are only discovered with hours of diligent research.
Let me do that work for you so you can enjoy the benefits of more income and higher total returns. And you can get all of these at 60% less what others will pay. Forbes Premium Income Report normally cost $995. New members can normally join for a special rate of $495. But for the next 48 hours, you can get the service for the entire year for just $395!
Still not sure you should join? Explore the service for a month. You get at least 8 stellar trades within that period. If after using the service for 30 days, your final decision is "no thanks," then you pay nothing.
Fair enough?
I uncover two new opportunities and send them to you every Tuesday and Thursday. You don't need to do every trade, but with our 95% success rate and average annualized return of 36.5%, you can be confident that the odds are on your side.
I look forward to helping you achieve outstanding investment results when you join us on our very fruitful endeavor.
Sincerely,
John Dobosz
Editor
Forbes Premium Income Report
P.S. Remember, you are always protected by Forbes' iron–clad satisfaction guarantee. In the unlikely chance that you're ever dissatisfied in our service, you can cancel anytime and you receive the balance of you subscription.
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