Selling weekly options is an ideal strategy for creating an extra “paycheck” every Friday!
First, by selling a weekly put option you act like the “house” in a casino. As the option seller, you collect a cash premium up front from the buyer who takes the risk and you let option time decay work in your favor.
Second, if you sell a weekly option on Wednesday at noon that expires on Friday, your trade is only open for 19 trading hours (2 ½ days)… which is less time for the stock to move against your position.
Third, your capital is working for you during those 19 hours but is only exposed for a short time… allowing you the flexibility if you want to change strategies the next week.
Fourth, you pay only one commission. If your goal is to have your put position expire worthless on Friday, there is no commission to close the trade.
And last, there are a number of stocks with weekly options where you can get into a position without using all of your capital: General Motors (GM), Blackstone Group (BX), Cheniere Energy (LNG), Bank of America (BAC) and many more.
And, if you own a stock in your account you never trade, you can sell weekly calls against those core assets and increase the real amount of capital you are using to create that extra paycheck
I like selling weekly options as part of any income strategy because as you can clearly see risks for the returns are minimized in a weekly options income strategy.
And this strategy, using simple tools, simple positions, can be repeated every week, over and over again exploiting one or a handful of ideas to put cash in your pocket.
So what looks good right now?
Here are 5 stocks to cash-in on trading weekly options.
Take home an extra pay day from the oil patch with little risk. Think simple, think (relatively low risk), think large premiums.
Andeavor (NYSE: ANDV) is the best independent refiner in the U.S. Their expanding operating margins for at least another four quarters and the stock is grossly undervalued, selling at a P/E multiple of less than 10. ANDV trades easily and well, is liquid and is quite volatile due to (a.) fluctuations in the world price of oil, and (b.) the rapid movement of capital in and out of energy ETFs and mutual funds that move as investors trade the price of oil. And the premiums are the highest you may see on an undervalued, low-risk company and equity.
The market is rewarding stocks with real growth, such as the automakers. That is not a joke. I visited the GM Flint Michigan Assembly plant where they put together pickup trucks and they are running three shifts and maxed out of capacity.
You can collect nice premium from both General Motors (NYSE: GM) and Ford (NYSE: F) weekly’s these days. I am biased towards GM (I have been driving Chevys – Tahoe, Suburban, Blazer, Blazer, Tahoe and a Traverse – seemingly forever). The stock is around $37 and it has very fat premiums on the weekly options.
You can grab quick weekly option cash from the Apple (NASDAQ: AAPL) “Ecosystem.” Apple is not just the largest market cap company in the world, but it is a stock on fire leading the way into a new consumer tech “supercycle” that will reward Apple as well as stocks within the Apple ecosystem. I like selling Apple calls every week…the premiums are very rich.
And then there are the great beneficiaries of the Apple ecosystem of suppliers. Corning (NYSE: GLW), another weekly favorite as the provider of the “Gorilla Glass” for the iPad. To make mobile devices you need glass –and Corning is the preferred supplier in this market. The stock price has been flat due to equally flat large screen television sales; mobile device glass sales grew in serious double digits in the last quarter. The stock is trading around $26 making it a great play for smaller accounts but has enough volatility to reward investors with generous weekly option premiums.
First Solar (NASDAQ: FSLR) is the best solar company on the planet and the king of large-scale solar installations. Yet, its shares have a tendency to fall in and out of favor with Wall Street. While the company is in great shape financially, as the recent Q2 earnings release showed, there is a good deal of headline risk in this stock. However, the volatility has the added effect of create larger-then-average option premiums, which is perfect for income-hungry weekly option sellers.
And finally, the market hates banks (always a good sign when there is a unanimous opinion against something) and it hasn’t been nice to the major money center banks. But now may be the time to get back in a small way selling weekly puts on Bank of America (NYSE: BAC). Bank of America is beginning to turn itself around and is selling for less than half of book value. And the decline in BAC has increased volatility in the stock and therefore increased the value of the calls and puts…making it another great candidate to generate instant cash profits trading weekly options.
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About The Author
Michael Shulman is a 30 Year Veteran of the financial markets – as a trader, a financial analyst, a financial writer and most recently as an educator.
Mr. Shulman made his first option trade in 1985 – COMPAQ Computer calls – a position that expired worthless. His second trade broke even; the third brought him a year’s salary, a near twenty to one return on his investment. He has never looked back. He entered the financial publishing business formally in 2001 as director of research for ChangeWave Research’s institutional research business and as the writer and editor of Hedge Fund Investing.
He has published two books – Sell Short and Made in America – both of which can be found on Amazon.com, and he is a frequent contributor to reputable financial sites like Seeking Alpha, MSN, MainStreetInvestor, and Traders Reserve.
Most importantly, since 2010, he has dedicated himself to teaching income investors how to get more income from their portfolios using simple yet safe options selling strategies which produce income every week. This approach was developed from the ground up in Mr. Shulman’s own accounts, his goal to develop a strategy that cannot be replicated by institutional investors of any size and therefore independent of fads and trends that change too often to provide a consistent approach for individual traders.
His trade recommendations in his Options Income Blueprint, Perpetual Income Portfolio Club and Income Masters services maintain a 98% success ratio, meaning his trades produce the expected income 98% of the time. No one’s perfect.