- Let’s say you want to buy a stock, but you don’t want to pay the current price.
- You don’t have to!
- This strategy is a safe way to buy stock … or to generate some income.
Banyan Hill’s readers are brilliant.
I’m not sucking up to you. I’m being honest.
We just had our Total Wealth Symposium in beautiful Amelia Island, Florida.
While I was there, I talked to attendees about all kinds of things … from their kids to their retirement plans.
And one thing kept coming up during our talks: These attendees — readers like you — are great at taking the information we convey and turning it into trades that work for them.
Today, I’ll share an example with you…
What a Great Idea!
Some of our readers pay less than the current market price for a stock they want to own.
Let me give you an example.
Let’s say you want to buy Bank of America Corp. (NYSE: BAC).
You like its current uptrend, but you don’t want to pay the current price. (As I write, BAC is trading at $30 per share.)
So, you don’t!
Several of you at the Total Wealth Symposium told me you use put options to get into trades. And I think that’s brilliant.
Selling Put Options
If you buy a put option, it gives you the right to sell 100 shares of stock at a certain price by a given future date.
However, crafty Banyan Hill readers sell put options.
That means if they still have the put option at its expiration date, they’ll have to buy the stock if it’s trading for less than the strike price.
That’s a mouthful, eh?
I’ll use some numbers.
Let’s say you’re happy to pay $30 per share for 100 shares of Bank of America.
However, if you can’t get the shares for that price, you won’t lose any sleep over it.
What you can do is sell one $30 Bank of America put option dated November 15.
The last trade on this option was at $1.19, so we’re going to assume you can get that price.
When you sell one of these put options, $119 ($1.19 times 100 shares) is deposited into your account.
That’s great, right?
The only kicker is that November 15 is the expiration.
If Bank of America stock is trading below $30 that day, you’ll have to buy 100 shares of BAC for $30 each.
Let’s say the stock closes at $29.50 that day. The cool part about this is you won’t be in a loss position.
You see, you sold the put for $1.19. That means the BAC share price can fall as low as $28.81 ($30 minus $1.19) before you lose any money.
Does that make sense?
When you sold the put, you gave the buyer the right to sell you shares for $30.
However, if shares are trading above $30 at expiration, the buyer isn’t going to sell them. He’s going to hold on to them.
If Bank of America is trading above $30 at expiration, you don’t get the shares — but you still win.
The $119 that you pocketed when you initially sold the put option is still yours.
I learned at the Total Wealth Symposium that many of the attendees like to sell puts on stocks they want to own. But if they don’t get to buy them, they’re totally fine with it.
After all, once you collect $119 enough times, it adds up to real money.
I would be willing to make this trade today. It’s a safe way to buy BAC stock … or to generate some income.
This Is a Great Way to Make Money
If this is appealing to you, you’ll have to do some legwork.
You may have to call your broker to attain the appropriate trading level to sell options.
Then you’re good to go.
That said, if you would like to learn from a successful trading pro, I suggest you look into Chad Shoop’s Pure Income option-trading service.
In this service, Chad regularly earns double-digit gains by selling puts on great stocks.
You can’t have a better teacher in this than Chad. He makes money on 95% of his trades in this service.
He’ll walk you through the steps to set up or adjust your account to be able to sell these options.
Please do yourself a favor and learn more today.
Good investing,
Brian Christopher
Editor, Insider Profit Trader