Your Frequently Asked Questions
Your Frequently Asked Questions
|Power Options Videos|
By now, we’ve covered everything you need to know to be successful with Pure Income and start collecting thousands in extra income.
That’s why I think now is the perfect moment to address any questions you might have.
So let’s get right into it.
Below, you can find some of the frequent questions new subscribers have asked me over the years and my answers. Remember, if you want to know something that is not answered in these resources, you can always contact me at firstname.lastname@example.org.
Pure Income FAQs
Question: Do I have to open an options account?
My Answer: Yes, but it’s easy, as you’ll see with my Quick Start Guide. You will usually have your account set up in as little as one business day. And it typically doesn’t take any longer than a few days. For those of you who already have a brokerage account and just need to request permission, you may hear back from your broker in as little as one day.
You also have to request permission to sell options before making your first trade. If you have any trouble getting approval for an options trading account, speak to your broker and inform them that you’re aware of the risks involved with selling options.
For more information, please read my my Quick Start Guide here.
Question: What do I do if I can’t get approved for the options level you mention?
My Answer: This is no problem at all. Remember, I asked my publisher to give you an extra month on us for a reason — I know it can take some time to get your account up and going. Your broker may be suspect at first, but they just want to make sure they cover all their bases. My advice is simply to work with them. You can follow me for a few weeks, read all my alerts and study all the online resources. Then go back to your broker, and they shouldn’t have a problem giving you an access level that allows you to follow this service.
Keep in mind, all you need to be able to follow every income trade I recommend in Pure Income is a very low level of options access (depending on your broker). As long as your account allows you to sell to open cash-secured, or covered, put options and call options, you can place every single trade.
And if you wish to use margin, that will require a higher level of account access. Sometimes your broker may want you to trade under a cash-secured account for a while to start, but down the road — typically just a few months — they should be willing to open your account up to margin.
Question: What risk tolerance is needed for Pure Income?
My Answer: Pure Income is designed for the risk-averse investor — the trader who is looking to steadily grow capital with minimal risk. In 2017, we had 33 new recommendations, and none were closed for a loss. In 2016, we had 21 new short put options, and none were closed for a loss. 2015 was the last time we had a recommendation that we closed for a loss, and it was just a 1% loss. The other 19 short put option recommendations for 2015 were closed for profits. Our largest loss ever when we recommended to sell to open a put option was 27% — and that was back in 2013.
As far as the risks associated with selling puts, you risk owning shares of the stock, so your risk is simply owning shares of the company. The only difference is that when you sell puts, you collect instant capital — the dividend premium — and your strike is usually below the current price. That gives you a bit of a cushion versus buying the stock outright.
But that’s why it is so important to only execute this approach on stocks that you already want to own in a portfolio. Then, by selling puts on those stocks, you are creating a very lucrative strategy.
Question: How many options contracts should I sell?
My Answer: That boils down to how much capital you feel comfortable investing in each position. The key thing to keep in mind here is that one contract represents 100 shares. You should NEVER sell puts on more shares than you’re willing to buy. If you’re comfortable owning 100 shares, sell one contract. If you’re comfortable owning 500 shares, sell five contracts.
So make sure you keep positioning size in mind.
Take a look at the example Capital Requirements chart below. It demonstrates how quickly your requirements can change.
|You Collect||Capital Required in a Cash-Secured Account||Capital Required in a Margin Account|
|If You Sell One Contract:||$160||$4,000||$800|
|If You Sell Five Contracts:||$800||$20,000||$4,000|
|If You Sell 10 Contracts:||$1,600||$40,000||$8,000|
In this example, we are collecting $1.60 per option. But remember that options trade by contracts, and one contract represents 100 shares of stock. So if we sold one contract, we would collect $160. In a cash-secured account, this would tie up $4,000 — the same amount you would need if you were put shares of the stock. If you made the trade in a margin account, you would need roughly $800, depending on your broker’s margin limits.
In the chart, you can see how quickly this requirement increases. The bottom line is that you never want to have more capital tied up in the cash-secured account than you are willing to risk in one trade.
Question: What other income strategies will you use in Pure Income?
My Answer: Aside from selling puts and covered calls, I will sometimes have other unique options recommendations for collecting income, such as making a collar trade. Don’t worry; I’ll always explain the reasoning and the steps for any unique trades within the email alert.
Again, these are just a few of the inquiries I’ve received. But I hope I answered some questions that might have come up while you were familiarizing yourself with my service.
And keep in mind that I always enjoy hearing from you, so please feel free to reach out to me any time at email@example.com.
Tomorrow, we’ll wrap up the Pure Income Getting Started Series with your chance to give me feedback by taking a brief survey. It’s a great way for me to understand how much the series has helped you, so I hope you’ll take a few minutes to answer my questions.
Editor, Pure Income