I've taken a little hiatus from posting here, but certainly not from collecting the easy cash that selling put options affords us.
If you haven't been selling put options in this market, then you've been missing out on a great way to earn income.
Most of my posts here discuss the put-selling strategy, and of course you can get my free "Put-Selling Basics" ebook right from my site.
So why haven't you joined us yet?
If you have even the slightest interest in buying a stock, then you can collect an upfront cash payment (the premium) just for your agreement to buy that stock. It's amazing!
By selling a put option, of course!
Here's a hypothetical example:
You have an interest in buying 100 shares of Walt Disney (DIS). Currently, the stock is at $103 per share.
But your research tells you that buying DIS at $90 per share is a much better entry point.
What can you do to make that happen?
You can either put in a limit-buy order at your broker to purchase shares of DIS if it falls to $90 (no guarantee that will happen)
You can sell a DIS January 2019 $90 put option for $1.80 per contract (hypothetical example) and immediately receive $180 just for your agreement to buy 100 shares of DIS at $90 per share at any time between now and January 2019.
Basically, the put-option buyer is paying you a "retainer fee" of $180 to hold your agreement for the next seven months until January 2019.
The only way you would have to make good on your agreement and purchase the shares is if DIS falls below $90 per share by January 2019.
If it doesn't, then your obligation to buy the shares goes away, but you get to keep the $180 retainer fee (the premium).
You would now be free to enter another new agreement to purchase shares of DIS and collect another round of upfront payments.
You could conceivably keep doing this for years on end and collect a massive amount of cash. That's what we've been doing.
And if DIS does fall below $90 by January 2019, then the put-option buyer would ask you to make good on your promise and purchase the shares. You get to buy the stock that you've been wanting all along. Win-win!
Have you heard the story of how Warren Buffett collected $7.5 million just for his agreement to buy Coca-Cola (KO)?
Yep, true story.
In 1993, Buffett wanted to buy shares of KO and his analysis led him to believe that $35 per share was the right price.
But KO was trading for $39 at the time. So he sold 50,000 put option contracts and collected a cool $7.5 million right upfront.
If KO fell to $35 by the expiration date, he would follow through on his agreement and purchase the 5,000,000 shares (each option contract equals 100 shares) at $35 per, for an outlay of $175,000,000.
Although those figures are out of range for us mortal investors, it certainly wasn't for Buffett.
Turns out, KO never fell to $35 (it went higher) and he wasn't able to buy the shares, so he had to just be content with his $7.5 million pay day. All in a day's work!
My point is - can you see the incredible benefits of put-option selling? There's so much cash to be made with this strategy and it's there for the taking every single day.
We sell put options at The Smart Option Seller and collect lots of cash in exchange for our agreement to buy shares of great companies at great prices.
Although the stocks have yet to fall to our desired buy-in levels, we're still happy to collect our fat retainer fees.
Put-selling is an incredible strategy. Come see what you've been missing.
And if you're interested in another high-level trading strategy that actually takes advantage of Warren Buffett's investing prowess, have a look at my other report here. It's an ingenious way to piggy-back this investing legend.
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