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How to Earn A Whopping 20% Interest

Discussion in 'Business & Tax Advice' started by robertwatkins, Jul 15, 2011.

  1. robertwatkins

    robertwatkins Junior Member

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    Many people in todays world think that a CD or Savings type account is the only way to make money on your money and earn a few paltry % but there is a better way. You can take your money and in todays markets earn from 15% to 25% interest or earnings in a safe very limited risk enviroment. Many people ask me how every day. Here is an example.

    Buy 1000 Shares of a quality stock. For our example we will use Veriozon selling at $36.90 per share.

    1000 VZ = $36,900 investment.

    This stock pays a $480 Dividend every 3 months.

    Dividend Income = $1920 which is 5 1/4 percent so how do we get that up to 20%.

    Today we sell a Call Option on the stock that is covered since we have the stock for September at $38.00 which means if our stock gets to $38.00 before September 11 someone has the right to buy it from us at that price. They pay us roughly $650 for that option. If they do get the stock we make $650 plus the $1000 our stock went up in 60 days if not we re-sell the option on September 12th for December 12th and get another $650 which we can keep doing 6 times a year.

    So to recap:
    $650 times 6 is $3900 a year income plus $1920 income from dividends for a total of $5820 in income for our $36,900 investment which is a earning of 16% inerest buying a quality stock with little risk exposure.

    All you need is a stock in the 5% to 6% dividend range and just keep rolling those options over as they expire.

    Should you get called and someones buys the stock that is great just re-invest in the next stock. So that you are earning from 16% to as much as 25% interest per year with very little risk.

    I hope this is a help to some of you and it doesnt matter if you invest $1000 or $100,000 it is the same interest rate.
     
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  2. xfactornos

    xfactornos Regular Member

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    I read this post 5 times and I still get lost, lol I guess I need to do some research on Options. I already have the first parts, a stable stock that pays 6% but the rest I dont understand.
     
  3. mungus

    mungus Regular Member

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    But on a Call option, wouldn't you be screwed if the stock dropped, I'm guessing you'd have to pay the difference no? Other than that sounds like a good investment strategy, I've only dabbled in day trading and never considered options and very rarely look at dividend yields so this is quite interesting as I'd like to get into the longterm game as daytrading is almost pure gambling.
     
  4. movieman32

    movieman32 Regular Member

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    mungus,

    Actually, if you are the stock owner (not the call buyer), you WANT the stock price to fall - so the person that bought your call option will not exercise it and you get to keep the stock and the profit from selling the call.

    As the seller of the call, you agree to sell the stock for a set price (ex. $38) if the stock price falls and the option owner exercises it, he has to pay $38 - no matter what the current market price of the stock.

    If the stock has a current market price of $41, you still have to sell it to the option owner for $38. As the option seller, you limit your upside potential profits on the stock, but you are protected on the downside as well.

    The person that bought the call has the right - not the obligation - to purchase the stock at the call price. You on the other hand ARE obligated to sell him the stock at the call price. In this case $38. If the stock price is below $38 at expiration date, the person will not exercise the option (because it will be cheaper to buy the stock on the open market) and the option expires. You get to keep the stock and the profits from selling the call.
     
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  5. robertwatkins

    robertwatkins Junior Member

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    you really dont care. the best scenario is the stock to go up. you get called, keep the profit, keep the premium the buyer paid you and do it again over and over

    or

    the price doesnt reach the call price and you keep the premium every 60 days.

    to answer the one person yes any stock can fall but this and the dividends offset the losses until the stock comes back up and that is the reason for only buying premium stocks not junk;
     
  6. 420lounge

    420lounge Power Member

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    how can you know people are going to buy your call options. From what I am reading its coming down to a lot of reselling... which implies a lot of buying. - the demand is that high?

    other then that im pretty lost
     
  7. robertwatkins

    robertwatkins Junior Member

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    there is over 1 billion share of stock sold per day on the stock exchange and millions of options so that is not a consideration.

    we have over 500K we do this with and earn over 120K each year and roll that back into the market as well as the other ventures some of you know that we do.

    my wife and i will be retiring next april and this is a way to not only retire but earn a huge amount of income if you have any money to work with. the reverse of this is to put you money in a savings account and earn less than 1 percent.

    actually if you had your money with a broker this is exactly what he would do with it.
     
  8. lumien

    lumien Junior Member

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    This is very sound advice. I think that Calls/Puts confuse people at first, but its really not that hard once you have read about them once or twice. Now I just need to get $36,000 to invest :)

    lumien
     
  9. exmortis512

    exmortis512 Registered Member

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    covered calls are a great and pretty safe strat in a low volatile stock, you actually dont want the stock to drop to much, you want it to stay the same or go up in between what you bought it for and what you made your call for.

    eventually after you keep rolling the stock it will become no risk because the premiums would have payed for the cost of the stock, and since you have not been exercised you would still have all your shares.

    although something similar to this can be accomplished for a fraction of the cost using options, incase you dont have 36k but this is sound advice.
     
  10. lumien

    lumien Junior Member

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    I am no expert, but from my understanding if you want to play options you are still looking at $10k minimum to really get started.

    I ran some quick numbers from the OP percentages, and came up with the following

    If you invest (very roughly), $2600 at the beginning of one year and get your 5% dividends and you sell your calls (1.5% of investment) and assuming that the stock price doesn't go up or down (simply for math's sake) you will make about $160,000 in 30 years. Now, lets say you invest an additional $2600 each year (or for the next 5 to 10), now you are looking at being a millionaire by the time you retire. No blackhat methods needed :)

    Lumien
     
  11. dkartdan

    dkartdan Newbie

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    enron was a great selling stable stock, so was bear sterns, and lehman, and worldcom, and washington mutual, and fannie mae, and so on and so on. your strategy would have left you with nothing (except call premium) if you picked 1 of those winners...

    nothing is guaranteed especially in the market, your advice is 1-sided and misleading.

    its completely plausible verizon could have a poor quarter cut its div and the stock will tank, your easy way to gain 20% in that scenario loses 20%
     
    Last edited: Jul 15, 2011
  12. exmortis512

    exmortis512 Registered Member

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    this is true, if you are interested in trading in the market learn proper risk management. a safer alternative would be something like a bull call spread. So many people have lost alot of money in the market due to not properly understanding how to manage risk.
     
  13. robertwatkins

    robertwatkins Junior Member

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    look guys i just used verizon as an example . i do catepillar, altria, verizon, spring, walmart just to name a few. this was meant to show people that you could make a great deal of money in an financial enviroment with little risk exposure and you do not need 10's of thousands to invest. only enough to buy 100 shares of the stock that you wish to begin with but as always on BHW there seems to be a lot of people who dont know what they are talking about venturing opinons. Please Mods delete the post as ineffective.
     
  14. dre1!

    dre1! Newbie

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    1st principle of market investing: extraordinary returns ALWAYS diminish over time. No free lunch suckers. If you hit a truly original scam you can play that till it gets flooded, but it will never last.
     
  15. prima

    prima Registered Member

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    AAPL QE2 Results will be out on Tuesday.Buy 1000 AAPL Share on monday.You will earn atleast $30 to $40 per share,as market is expecting good results.Just as GOOG share raised over $90 in last 3 days !