So the thing with stocks. It’s that like 90% of people are the ones that want to hit it out of the park. Throw down $50 on an option and return $1000.
But the thing is, that’s not going to happen often It’s a one in a hundred shot. You are goin to lose more than you win.
Even with Options. Yes, Options can grab you giant returns if you hit it right in the short term.
But there is one thing that will cash out money, for profit, every single goddamn time.
I’m all about scalping profits. I only want profit. I don’t care if it’s 0.01% anything is better than nothing. I don’t care if I give up future profits to eat real time profits either.
OK, I may have made 60% if I healed onto the stock, but I don’t care. I’ll give up the hypnotically profit to grab real profit.
It’s all about covered calls. If you do this right. There is 0% chance of losing money. Granted you might only make 1% or 2% here and there. But it is a guaranteed 1%. Not looking for the home runs going 2 steps forward 1 step back.
The thing is, you have to have a lot of capital. You have to buy 100 shares of the underlying stock. I’m going to use the real life example of Salesforce.
Salesforce yesterday was trading at $183.50. That means to make this works, I need $18,350 in capital, because I have to buy 100 shares of CRM (salesforce stock ticket).
So I pay $18,350 for the stock to have 100 shares.
So I look at the strike price of $184.00
I then bought a 1 week covered call at $184.00 for $8.40
This means at the time of my covered call, I am given $840. Straight money given
That is my money. No if and or butts. I get $840 to do whatever I want with. For me, I usually transfer to my checking account, I have $840 in free money.
Now you have a weeks to see where things are going to do.
If the stock jumps like crazy, say $185. The call gets called in. I have to sell the shares for $184. Even though they are worth $185, I only get the $18,4.00 since that was what my strike price was
It executes at $184. The 100 shares I have are sold.
Granted I would have made $500 in profit I I just owned the stock, But instead, I get the $18,400 PLUS the $100 difference between S184.00 and $184.
So I make $1000 profit from doing nothing.
This is going to happen 9 times out of 10.
The only way you LOSE money, isn’t even a really big lose, and will turn into a gain.
So big thing is, don’t do this with weird stocks. Stick to blue chips.
The negative isn’t even really that negative.
So say you bought those 100 shares at $184.00. You had the covered call, where you made the $840. You keep that. But lets say the stock dropped down to $175
You will keep the $840 premium. It will expire on Friday.
Now you have 100 shares of the stock at $175.00. You just turn around and sell a new contract on Monday for like $7.50. You collect the $750 right away
At this point, you have gotten $1550 in premiums sent to you.
It executes because it dropped so low. Say it sells at $170
You get $17,000 from the same. Plus the $1,550 from the premiums. So you have made $18,550
You have made $200 from the initial trade in 2 weeks, for a stock that DROPPED 13% and finding a blue chip that drops 13% in 2 weeks is next to impossible
Now I’m going to give you another real life example.
Cisco.
Cisco was trading at $73.88
I bought 100 shares at $7,389
I bought a $74 one week covered call at $1.21
So I collected $121 right off the bat
Over the next week, the stock jumped to $78
When The call was expired. I had the $1.21 from the premium, The call executed. So I had to sell 100 shares, at $74 (even though it was trading at $76.88 at the time). So I lost the 100 shares, BUT I made the $121, PLUS my shares were at $73.88 a share at the time, so I sold them at &74. So I made an extra $12. So My profit in this trade was $$133
Now I’ll talk a big loser.
I bought Amazon at $200. So I spent $20,000 to buy 100 shares,
I did a one week covered call for $920.
So I was given $920 up from.
The stock TANKED after earnings reports. It Dropped down to $175.
So at this point, my shares were only worth $17,500 after I spent $20,3000 to buy them.
BUT I already made $920 from premiums after the first week.
So my lose wasn’t $2800. It was only it was only $1,880 since I already got $920 in premiums.
Since the stock dropped, my premium expired So I got another one, also at $875
The stock kept dropping. It was down to $172 a share.
But at this point, I had gotten $1,795 in premiums.
There is NO blue chip on earth thy is going to be down 3 weeks in a row. It’s just not going to happen. If that could happen they wouldn’t be in the down. Just NEVER going to happen. Even in The worst Down Market. Literally can’t happen.
So say on the 3rd week, the stock is back up to $175 a share. You sell a covered call for $7.50 so $750. You collect that. You are now up to $2,545 in premiums collected.
Between what the stock trades at, plus the premium, you are at $20,045. You made $45
If the stock goes downs, you collect 100% of the premium, which could be hundreds of dollars. As long as you trade blue chips. Even if the stock drops A LOT, you are going to make money.
Then for shits and giggles I’ll give you a real life example of mine for stocks that went UP
I bought 100 shares of Verizon at $43.75 a share. So I paid $4,375. I sold a covered call at $44.00 for $1.10
After earnings report the stock jumped QUICKLY to $45.
My call got executed. At $44. So I paid $43.75 a share, and it got executed art $44.00. So I make $25 off the execution, BUT I also have the $110 from the premium. So I banked $135 from it.
If you have 100 shares in something, and you do a covered call ABOVE what the current price it, you are 100% guaranteed to make money. Yes, it wont be a home run, you’re looking at 1-2%
But if you do that every week, you’re looking at 50-75% returns on everything.
