It’s another year. Changing jobs. Maybe changing cities. But stuck in the same career which maybe you don’t really love. But you need the income to just live and pay the bills.
Then you wake up one morning and you look yourself in the mirror and think. Damn, I really thought you’d be further ahead by now.
Whatever it is we probably have all had that feeling. That empty feeling inside.
That it was time to reinvent ourself and have a side hustle. Learn a skill and create some extra income on the side. Have our own business and someday get out of the rat race. Something where we can rely on ourselves and not a company where someone else is in control of our future.
I want to talk to you about how to create a side options trading business in just a few steps.
I’ll show you:
- Why You Might Want to Trade Options Over Stocks
- How To Place Your First Option Trade and Start (Showing a real example on the option trading platform)
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What’s up guys, it’s Darren here. Thanks for watching. We talk about action steps you can take today to increase profits and reduce risks in your portfolios by trading options.
Before we start, if you appreciate all the research and information that goes into making a video like this, it does help out tremendously if you hit the like button or subscribe to be notified of more videos like this.
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Be sure to download the FREE options Workshop in the link below. It talks about the two main benefits of trading options over buying stocks.
DISCLAIMER, I am not a financial planner and I am not recommending trades. Please do your own research and if you are new or learning options, I recommend you start small.
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Why You Might Want to Trade Options Over Stocks
Guys, let me start by saying don’t quit your job just yet. And keep investing in your 401K or retirement savings accounts. This isn’t a get rich quick scheme. However, options can be run like a business to create income once you get the hang of it.
Here is why:
When selling options, you are reducing your cost basis and you can multiply profits.
Let’s go to the Tastytrade trade platform. It’s the best platform for trading options. I’ll put a link down below.
We go to the trade tab and punch in SCHW for Schwab in the upper left.
Let’s buy 100 shares of stock by hitting Long Stock and Go.
Schwab is trading at $49.39 mid price. To buy 100 shares of stock it will cost the ask price of $49.52 x 100 shares so $4952. You make money dollar for dollar if the stock moves up and you lose dollar for dollar if the stock goes down in price.
Now let’s take a look at selling a PUT option in Schwab instead of buying the stock.
While still on the trade tab we hit Table mode to see the different option chains.
We click on the May 19th option chain since it is closest to 45 days to expiration. This is the sweet spot.
We then click on the bid to sell the 45 strike Put option. Now let’s switch to the curve mode by clicking on Curve.
Now instead of paying $4952 to control 100 shares of stock, we collect $179 up front when we place the trade!
Yes, we pay zero and we receive $179 just for placing the trade. Now at the end of the 42 days to expiration when the option contract expires, as long as the stock price is above the $45 strike price we keep all of the $179.
But remember the stock is trading at $49.39. So the stock can actually drop $4.39 to $45 and we still keep the profit. That is a huge 9% drop in just 42 days.
So let’s say it stays above the $45 strike price. $179 in 42 days annualized is $1,555.
Now even though we technically didn’t pay anything for the option contract, the trade did utilize some buying power in our trading account.
It utilized $552. In other words we needed to have that in our account as insurance to place the trade. So by having to put up $552 and making $1555 per year, that is a 355% annualized return.
You wont make that every month unless the stock just continually goes up and stays above your strike price month after month. But you get the idea.
We know we keep the $179 we collected if the stock stays where it is at or moves up. It can even drop 9% to the $45 strike price and we keep the money.
But What Happens if the Stock Price Goes Down below the $45 Strike Price?
Our breakeven is all the way down to the $45 strike price – the $1.79 per share so $43.21. Any price movement down to that point and we stay profitable. So that is actually a 13% drop before we start losing money.
However, once we are below the $45 strike price we can be assigned the stock. What does this mean? Well it is not necessarily a bad thing.
Remember we could buy that 100 share of stock now for $49.52. If we are assigned the stock at $45 then we are getting a $4.52 discount! A whopping 9% discount! An we are only doing doing doing this on stocks we like and want to own anyway.
So You Can See How by Selling a Put Option we did the Following:
We increased our profits and ROI by over 100% annualized depending upon exactly what the stock price does.
So we reduced our cost basis and our risks.
And worst case, we bought a stock we wanted to own anyway at a huge 9% discount if the stock price did happen to move down.
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Alright guys, I’ve put a link down below for the FREE Options Workshop. Be sure to grab that.
Remember to hit like and subscribe and leave a comment below with your thoughts on the video.
Thanks and see you in the next one!