One of my pet peeves is trading just to trade.
I work countless hours to design profitable systems that, when followed to a T, will deliver profits for us through any given year.
The last thing I want to do is chase the market with trades here and there, just because I feel like it.
Even if it has been weeks without a new trade, staying patient is the best approach.
There are so many traders that believe they have to be in on every move in the market. They don’t.
The best traders in the world are happy to sit on their hands while others are betting on every expected move.
Of course, this can lead to cash sitting idle for extended periods of time.
Fortunately, there’s a way to use that cash to get paid while also waiting for that next big move.
Are You Leaving Money on the Table? Getting Paid to Sell Your Shares
I run a strategy in a premium research service called Pure Income that is all about selling options.
It’s the single best way to generate income from the market.
You don’t need dividend-paying companies or have to tie your money up at a bank and yield next to nothing.
Selling options gives you a win-win approach in the stock market to generate a consistent stream of income. Here’s how it works.
There’s two simple ways to sell options for income.
You can sell covered calls, where you own the underlying stock, and are basically saying you want to get paid to exit the stock at a higher price.
By doing this, you collect a premium that is yours to keep no matter what.
The stock could rally past the strike price. In that case, you simply exit at the strike price when the option is exercised and the premium stays in your account. You get paid to sell, which is free money.
And if the stock fails to climb above the strike price? Even better. You keep the premium and still own the stock, meaning you can do it again and again … selling more covered calls and collecting more premiums.
My Favorite Options-Selling Strategy
Selling covered calls is one way to collect income by selling options.
The other way, and my favorite way to sell options, is selling put options.
In this case, you are agreeing to buy a stock at a discount if it reaches a certain strike price. You also receive a premium. Think of it as your commission for selling the option to a buyer in the open market.
It’s a win-win. You are essentially getting paid for the opportunity to buy a quality stock at a better price than everyone else.
The best thing about this is that you pick the stock. So, my No. 1 rule when selling put options is to only sell them on stocks you already want to own.
That way, the worst case is you get paid to own shares of a company you were already interested in to begin with.
It’s the best of both worlds.
If the stock stays above the strike price, you keep the premium you collected from the option.
If the stock falls below the strike price, you end up paying the strike price for the stock, but you still get to keep the premium.
Heads You Win, Tails You … Also Win
In either scenario, you walk away happy knowing you are getting paid.
Here’s the thing.
You can spin this off into a full-blown income strategy by applying a little bit of technical analysis. Technical analysis can help you identify the key levels the shares will likely stay above. This way, you can repeat the process over and over again to create a steady stream of income.
That’s why I love this approach.
But it is also a way to get paid to own shares of a company at a discount.
At the end of the day, it’s a win-win strategy that is a great resource for any trader or investor in the market.
It’s the best use of your idle cash at any given moment.
And knowing I can generate 5% to 10% in 90 days from my cash (as opposed to 0.5% in a savings account) makes me MORE than happy to sit on my hands when markets are unclear. When I’m unsure where the market is going and don’t feel like taking big swings, selling options is the best move I can make.
Chad Shoop CMT
Editor, Quick Hit Profits
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