PATHWAY TO PROFITS: Lesson #6, Trust Movement
We’re big into quality questions. We want to spend our lives asking and posing Quality Questions, and surround ourselves with QUALITY. Let’s start there. When you are in the boxing ring of life, and you look in your corner, who is there? Whom do you have helping you? Do they get anything out of what you do? Can they give you unbiased advice—or do they just have products for sale?
We’re sitting over here, raising your hand, pitching for the job. We are pure educators and get nothing out of what you do, what you make. You learn and you earn.
Now to be sure, I’ve done many forms of investments—real estate, running small and big companies (One Public Traded), oil wells, antique cars, etc. If there was anything I could show you—assuming you’re an Average American—that is more affordable, more appropriate and holds the promise like Writing Covered Calls—I would show you that. In the next lesson, I’ll shock all of you with a different way to view this profit-making process.
THIS LESSON IS ABOUT MOVEMENT:
People often ask, what type of stock are we looking for? How do we weed through all of the garbage information out and about? Well, one thing: we show our trades. Most educational sources do not.
Let’s look at a few items we look for—items that make a good Covered Call Stock.
- We need stocks with some movement. If the stock is stuck—what anyone would call boring—the option premiums won’t produce a good return.
- The movement can be sideways, meaning it’s trading in a narrow range.
- Specifically, with stocks in the $5 to $15 price range, we want a stock that moves up 50¢ to a dollar every few days (at least within a week) and then down 50¢ to a dollar within a few days.
- As a percentage: If the stock is $5, then we like the stock move about 50¢ or so—or 10%. Quite often this translates into a 50¢ option. You can see this would generate a 10% return.
- If we buy the stock on margin, putting up half of the money, you’ll see this 10% go to 20%.
- We don’t always get 20% or even 10%. That is the target. Look at the real deals in these lesson, up to now. You’ll see these percentages pan out on many trades. We are trading on our good investments.
- We often try to buy back the call option on a dip and then, try to re-sell it on the next rise. We call this the “Buy-Back and Roll-Out.”
- We put in a stop-loss order on the stock, protecting the downside. There is ample discussion on stop-losses in Income Quest’s Mega-Course: PAID TO TRADE.
We call this “Assets Producing Income.” It’s a great way to generate income on a monthly basis. Why? Because we’re taking in income from an outside third party. We get their income in one day. We can use it right away by pulling it out; leave it alone, or use it to buy more stocks. It’s our money.
Yes, we have to leave the position alone until expiration date, or we can end the position early.
NOTE: Everything in these PATHWAY TO PROFITS Mini-Lessons deals with Monthly Income. There are variations on a theme. There are other ways to do this complete trade with options (Bull Call Spread). And there is so much power in the Buy-Back.
I look forward to you joining with us in this INCOME QUEST.