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Thursday, January 10, 2013
Did you ever wish you had the power to print money?
I'm not talking about the counterfeit stuff that will get you thrown in prison. I'm talking about printing legitimate U.S. currency you can use to pay your bills, buy a new ski outfit, take a dream vacation, or just add to your retirement savings.
There is a way to do it. I know because I've been doing it personally for more than 20 years. I've educated thousands of investors on how to do it themselves. And it's the focus of my Advanced Income newsletter.
Obviously, we're not literally printing money. But we are collecting cash upfront for making investments.
For example, the first investment we made last year was in Paramount Gold (NYSEAMEX: PZG), a small gold-mining stock. PZG went nowhere in 2012. It started the year at $2.30 per share and it ended in the exact same place. But we made 43% on the stock. We "printed" $430 for every $1,000 invested.
We did something similar with Aurizon Mines (NYSEAMEX: AZK). AZK actually fell in value last year. But we printed a 19% return in just five months.
We also printed an 11% return on Silver Standard Resources (NASDAQ: SSRI) – another mining stock that fell in value last year – in six months.
The ability to print money isn't limited to just the mining sector. Last year, my subscribers got paid 13% in four months on casino operator MGM Resorts (NYSE: MGM) and 12% in two months on semiconductor company Kulicke & Soffa (NASDAQ: KLIC). We've made 13% in two months on coal company Walter Industries (NYSE: WLT), and we're up 9% in one month on oil company InterOil (NYSE: IOC).
I could go on, but you probably get my point. There is a way to generate cash on your investments. It consistently generates 15%-20% returns per year – which beats the heck out of anything you'll get in a bank CD or money market fund or in the bond market. And it's safe... so safe, in fact, that I showed my father-in-law how to do it four years ago. He recently told me last year was his best year ever.
The strategy we use is simple. We buy cheap, beaten-down value stocks. Then we get paid to agree to sell the stock to someone else at a higher price sometime later. We get the cash immediately, and it's ours to spend however we want. So it's like having the ability to print money.
Here's how it works...
Last May, I recommended my Advanced Income subscribers buy shares of Iamgold (NYSE: IAG) at $10.20 per share. At that price, IAG was dirt-cheap. The gold stock traded at less than five times earnings, paid a 2.3% dividend, had $2.86-per-share worth of cash on its balance sheet, and was sitting on a $21 billion mountain of proven and probable gold reserves. There just didn't seem to be much more downside risk to the stock.
Then we sold the IAG September 11 covered call option against the shares. By selling the call option, we gave someone else the right to buy IAG from us at $11 per share if the stock closed above that price on option expiration day in September. For that right, we got paid $0.85 per share.
In other words, for every 100 shares of IAG we bought at $10.35, we got paid $85 for agreeing to sell the stock at $11. That's like printing $850 of cash for a 1,000-share investment. It was an immediate payment, and we could spend it any way we wanted to – a new outfit, exercise equipment, a weekend getaway, or whatever.
As it turned out, IAG was trading above $11 per share on option expiration day last September, and we ended up selling the stock for $11. That gave us an additional capital gain of $0.65 per share. So the total return – the option premium of $0.85 per share plus the $0.65 capital gain per share – ended up being $1.50 per share, or 18% in just four months.
That's an absurdly high return for such a short time in a low-risk stock. And we see these sorts of opportunities all the time. In fact, I'll have a new recommendation for my Advanced Income subscribers this afternoon. It's a trade that will pay us 8.5% right away with the chance to make up to 18% in the next five months.
So if one of your resolutions this year is to "make more money," you need to learn this covered call writing strategy. It is the best way I know of to legally "print" money.
Best regards and good trading,
Dr. David Eifrig's subscribers also regularly generate safe, double-digit income streams with covered calls. "For many folks, learning this strategy is like walking out of a dark cave and into the sunlight," he says. Learn more about the strategy here.
Back in October, Brian Hunt walked Growth Stock Wire readers through a covered call trade on Microsoft. Learn how to collect 17% or more per year on the blue-chip software giant here: Another 17% Payout from a Cheap, Dominant Tech Stock.
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