More about Stock Options

Writing Stock Options

If you’re after more monthly income, then writing stock options is for you. The wealthy have been writing stock options for years. When writing stock options, premium from the sale is deposited into your account the next business day. You keep the premium regardless of what the stock or option does in the future.

Writing stock options on low priced stock (<$25) creates higher yield than writing stock options on higher-priced stock. A 60 cent premium on a $10 stock is much better than a $5 premium on a $100 stock.

Warren Buffett said: If you own equities, over the next twenty or thirty years you’ll get a reasonable return. maybe it’s 6%, maybe it’s 7%. People who expect 15% a year are doomed to disappointment. You can make 60% or more per year, compounded monthly. with less risk, by writing stock options.

Writing near-month stock options results in higher yield than writing far-month stock options. Far-month stock options or LEAPS usually can’t deliver 5% a month like near-month stock options can. When you sell stock options there is also a chance that the stock price might go opposite what you expect. The shorter the time to expiration, the less chance of this.

Stock Options x Compounding = Wealth

Cash from writing stock options can compound into great wealth. Seasoned investors — those who understand how a 5% gain every month can make them rich, will see incredible wealth-building power in those numbers.

Most investors simply purchase stock with hopes of it increasing in value. While stock options writers have increased their return significantly, the traditional investor still waits for that big upward stock price move.

Stock Options Safety

Don’t want to risk losing money? The deeper ITM a covered option is, the more likely the covered option is to be exercised, the stock sold, and your cash freed up. Selling ITM covered stock options helps protect the seller from adverse changes in stock price.

Investors should question picks made by others. Neil Roland of Bloomberg News reports, More than a quarter of analysts reviewed by regulators bought shares before initial public offerings by companies they covered, and some made as much as $3.5 million by selling their shares while telling investors to buy. Many advisors use a tactic known as pump and dump, in which they own stock, then hype it so you’ll buy.

Nobody cares more about the safety of your money than you do, you should select stock options yourself. The Option Yield Report’s screened list is essential because it lists the highest yielding stock options, provides opinion and trend analysis on each stock option, and ties online research tools to the options. Unlike print or email publications that contain obsolete information, online data has breaking news, and current charts and quotes.