Learn the strategy behind nearly 100 consecutive closed profitable trades
What do you consider to be the greatest streak in sports?
There’s the New England Patriots winning 21 consecutive games in the NFL in 2003/2004 … Or the New York Giants (baseball, not football), winning 26 straight in September of 2016 … Perhaps the LA Lakers, taking 33 wins in a row during 1971-1972 behind Wilt Chamberlain, Elgin Baylor, and Jerry West …
From college, in the 1950s, the Oklahoma Sooners piled up 47 straight wins … Or there’s the UCLA men’s basketball program under John Wooden, winning 88 consecutive games from 1971 through 1974 … Or perhaps you’d point toward the UConn women’s basketball program that racked up a staggering 126 consecutive regular season wins starting in 2014.
***Here at InvestorPlace, we’re about to celebrate a milestone in a streak that’s still going …
It’s one of the most impressive runs we’ve seen come out of the investment industry. In fact, I wouldn’t be surprised if it raises eyebrows and leads to some skeptical emails from readers.
But I hope any skepticism will be put on pause long enough to grasp the investment approach behind the streak. That’s because this is a strategy we want you to understand. Then, we want you to help your siblings understand it … your parents … your children. Anyone important to you.
That’s because — to put it simply — this strategy generates streams of cash flow and creates wealth. That’s why some of our most senior analysts and staff at InvestorPlace use this approach to make money in the market.
Learning this market strategy could be even more important if the Fed cuts rates as is widely expected next week. As you probably know, finding safe, big yield isn’t as easy as it used to be … but the strategy in question can turn even the most barren income-markets into sources of consistent, gushing cash flow.
So, what is this streak, and what’s the market strategy?
***John Jagerson and Wade Hansen are about to reach 100 straight profitable closed put-write trades in their Strategic Trader service
It will likely happen within the next several days, depending on whether John and Wade decide to close out any trades early.
Frankly, 100-for-100 is an unbelievable track record. The investment equivalent of The Pats, Lakers, or UCLA …
And as if the streak isn’t impressive enough, the average annualized yield of these winners is roughly 49% — and that excludes some outliers with incredibly high returns, because John and Wade felt those results were too atypical to include in the official number.
For context, the highest yielding savings account we can find right now yields 2.52% … The highest-yielding 1-year CD looks to be about 2.80% … The S&P 500 is currently yielding 1.87% …
Or there’s John and Wade racking up 49% annualized-return trades.
If you’ve been around the markets for a while, you recognize just how unusual this streak and its average annualized yield truly is. We’re incredibly proud of it, and take our hats off to John, Wade, and the Strategic Trader subscribers who’ve been along for the ride.
***On that note, John and Wade have shown countless subscribers how to regularly pull hundreds, thousands, even tens of thousands of dollars out of the market through their system
It should come as little surprise, then, that the guys have developed a loyal following of devoted subscribers.
For example, there’s the subscriber aptly named Lucky. He’s a small business owner from Minnesota. Despite having never used the strategy before, he’s made $8,534 in extra income already.
Then there’s the other strategy-newbie who reported it was no problem to learn and “found it easy to get started.” He said he’s made “$532 by selling premium; $3,900 by stock appreciation.”
I bring up these two subscribers to help address the biggest obstacle that stands between investors who are new to options and generating consistent income from options …
It’s either fear that the strategy is too dangerous, or fear that it’s too difficult to learn.
To address this, in today’s Digest we’re going to walk through John and Wade’s option strategy in basic terms.
The goal is simple — demystify it. Pull back the curtain and show you what the fundamentals of these trades are.
Afterward, if you decide to incorporate options into your market toolkit, wonderful — we’re confident you’ll find it to be a powerful way to generate income in all sorts of market conditions.
If you decide it’s not for you, at least you’ll have a greater understanding of options. And at the end of the day, our goal here in the Digest is to help make you wealthier and wiser. So, you win either way.
Let’s jump in.
***How to generate streams of income using put options
The stock market is full of gamblers… get-rich-quick dreamers who care little about the traditional pillars of safe investing — dividends, stable cash flows, and buying elite businesses at great prices. Instead, these gamblers want huge returns overnight.
They often approach the markets with a casino mentality. They’re not really investing, they’re betting — sometimes thousands (even millions) of dollars on hopes of “hitting it big.”
So, what’s one of their favorite ways of swinging for the fences?
Now, stock options are widely misunderstood financial vehicles. The popular press, and perhaps even your own broker, may describe options as financial weapons of mass destruction.
A foolish idea that’s certain to end in financial ruin. But that’s a shortsighted generalization.
Think about your car. Used by a responsible adult, it’s an amazing tool that provides you convenience, comfort, and mobility. Of course, that same vehicle, when in the hands of a naïve teenager, could be a weapon.
It’s similar with options. The asset itself isn’t necessarily a problem. It’s the misuse of this powerful tool.
The truth is that when you understand how to trade options wisely and effectively, they can be an invaluable addition to your market approach, increasing returns and reducing risk.
You see, the way most gamblers use stock options, it increases their risk. Often, they’re putting their entire capital allocation on the line. So, if their bet goes bad — poof — that money is gone. But John and Wade’s technique uses stock options to decrease the risk to their capital.
By collecting the money others gamble away.
Basically, their strategy teaches you how to play the role of the house — while others are gambling, you’re the casino.
***The fundamentals of selling options for income
In simplest form, a stock option is simply an agreement between two investors. This agreement details the conditions in which these two investors might agree to a buy and sell a stock.
For instance, let’s say that Jim holds a big chunk of Microsoft in his portfolio. The company announces earnings soon, and Jim is worried about a miss. He fears Microsoft might sell off on the news. Perhaps he’s in some financial situation where he can’t afford a major drop in the value of his assets.
So, he finds Mary and offers her a deal … If Microsoft’s stock price falls below a set price (called a “strike price”) at any time within a specific time period, then Jim can sell his Microsoft shares to Mary for an agreed-upon price. Mary will buy those Microsoft shares for that price — even if Microsoft’s market price at the time is lower.
Basically, Jim has a hunch that Microsoft’s price will be going lower. Given this, he’s just gotten himself an insurance policy. Now, that’s obviously a good deal for Jim. But what does Mary get out of this?
Well, in exchange for making this deal (in which she plays “the house”), Mary receives cash from Jim, paid up-front, which she gets to keep – regardless of whether Microsoft’s stock drops or not.
That means if Microsoft comes out with better-than-expected earnings and the stock climbs, it will never dip below the strike price. And that means Mary walks away from this deal with nothing but a new wad of cash in her pocket. Jim continues to own all his original Microsoft shares.
The option just described is a “put” option. And with John and Wade’s strategy, we play the role of Mary. We sell puts to other investors. This puts us on the hook to buy shares of stock under certain circumstances. In exchange, we are paid cash, up-front, as part of this deal.
Now, if you’re thinking “Hmmm … This could mean I might have to buy a stock at some point” then you’re right. And that leads us to a critical detail …
***John and Wade only make these deals on world-class companies, the type of market dominating stocks we’d want to own anyway
The premiums an investor might collect by selling puts on risky, highly-volatile stocks are usually much higher than the premiums on safe, steady blue-chip stocks, like Microsoft or Coca-Cola.
And this is where many investors are led astray. John and Wade avoid this by making a critical distinction …
They only sell puts on investments that they’d be happy to own as pillars of a long-term buy-and-hold portfolio. For example, as I write, they have open trades on Home Depot, Starbucks, Cisco, Walt Disney, and Microsoft, among others.
This type of dominant company usually holds the No. 1 position in their markets, rakes in huge amounts of cash … and often pays healthy, growing dividends. They rarely experience major declines … but on the occasions they do, it’s generally a temporary stumble — often great opportunities for long-term investors to step in and load up on bargain prices.
Think of it like this …
If you believe Microsoft is going to be a great long-term investment, you could buy it right now at today’s market price … OR … you could make a deal …
With this deal, you’ll buy Microsoft only if it sells off, say, 3% from its market price today. If it does, you’ll buy it at that lower price. In exchange for agreeing to buy at that cheaper price, you’ll earn cash, today. And you keep this cash regardless of what happens.
So, if Microsoft shares fall 3%, you buy this elite stock at a discount to today’s market price (with the premium in your pocket). And if Microsoft doesn’t sell off? You just walk away with a wad of money.
Of course, if you do end up buying Microsoft, you can then turn right back around and continue generating income by selling a different type of option on your shares — a “call.”
That’s what makes this strategy so safe and profitable. It provides smart investors lots of ways to win. That’s different than so many other trading strategies that have only one way to win … and lots of ways to lose.
***Let’s look at an example of a real trade
On Monday, John and Wade opened a new trade on Microsoft. As always, their focus is on income and safety. From their update:
… because the market has been a little unsettled, we want to be very careful about how we add risk to the recommended portfolio. That’s why we are adding Microsoft (MSFT) — our most profitable position over the last 15 months.
John and Wade then go into detail about Microsoft’s strength as a company, which supports why it could easily be a great long-term buy-and-hold investment. Their analysis combines both fundamental and technical elements.
As to the specs of this particular trade, I’ll turn to John and Wade:
Instant income: With this put sell, we plan to collect an instant income payment of at least $162 per contract.
Put expires out of the money: If MSFT’s stock price remains above our $136.00 strike price at expiration on August 16, the put will expire worthless, allowing us to keep the $162 per contract we receive for selling this option. That’s a return of 6.04% in just 25 days or an annualized return of 135.61%.
Put expires in the money: If MSFT’s stock price is below our strike price at expiration, you will be “put” 100 shares of MSFT per contract at a cost basis of $134.38 ($136.00 strike price — $1.62 option premium). That’s a discount of 2.99% below the current market price.
Taking possession of the shares will then allow us to write covered calls against the stock for further income.
***If you’re interested in this strategy, consider this just the beginning
We obviously can’t cover all of the details of John and Wade’s strategy in this one Digest. Fortunately, the guys walk new subscribers through all the nuts-and-bolts in their Strategic Trader service. You’re never left wondering “wait, what do I do now?” John and Wade explain all the steps and walk their subscribers through every action.
Before you know it, you’ll be profiting from trades like the one on Microsoft, which is targeting a 6.04% yield in just 25 days.
Think about that for a moment …
When you think of “dividend stocks” what comes to mind?
Perhaps Johnson & Johnson? IBM? Duke Energy? Altria? AT&T?
As I write, the average dividend yield of these five stocks is 4.86% which, as you know, is paid on a quarterly basis.
Meanwhile, if everything goes according to plan, John and Wade’s Microsoft trade will put a 6.04% yield in subscribers’ pocket in less than 1/3rd of that time.
I’ll end today’s introduction to puts here. But I encourage you to re-read this Digest if it will help everything sink in. Once you understand how to sell puts — and how profitable this strategy is — I suspect you’ll be hooked.
If you’re already curious to learn more, just click here for additional details on how to get started.
Congrats to John, Wade, and all the Strategic Trader subscribers for approaching this remarkable milestone. We’ll see you at 200.
Have a good evening,