Option Trading Strategy: How to rent out your shares
Tell me…. if you owned an investment property, would you rent it out to receive the monthly income or would you leave it vacant and miss out on the regular cash flow?
You’d be crazy to leave it empty and miss out on all that rental income wouldn’t you?
Did you know you can do EXACTLY the same thing with shares but you don’t need to outlay even half the amount of money you’d need to buy a property!
Just think, if you could make an extra 5% each month just by renting out some shares you own, that would equate to 60% annually!
Imagine if you did it for just a few years?
What sort of difference would that make to the quality of your current lifestyle?
This strategy uses Stock Options (Call Options) and is commonly referred to as "Renting Shares" It really can be as ‘safe as houses’ when you have the right tools and know-how to put it in action.
In fact, I was lucky enough to have someone teach me this strategy years ago and I’ve been able to quit my full-time job and make my own decisions about how I live my life today, so I feel it’s only right I share that knowledge with other people.
Today I’m going to show you step by step, EXACTLY how to do this but I want you to understand a few things before I begin.
The first one is peace of mind, or as I call it…. the ahhhhh factor. You’ve probably heard of it before:
Insurance
Let’s go back to that investment property…. or ANY property you buy in fact! Would you invest your money in a building without insuring it? What if the tenant trashed it, or worse, what if it burnt to the ground and left you with nothing?
You’d feel sick wouldn’t you?
My guess is, you’d pay for an insurance policy on the property and you’d either pay by the month, 6 monthly or get a discount and pay for the whole year upfront!
You have the exact same choice when you rent out your shares. You can protect your capital and buy an insurance policy and you can pay for it over whatever term you wish.
This insurance is in the form of a Put Option contract. When you own one of these contracts it gives you the right to sell your shares for an agreed price at anytime throughout the life of the contract, whether that be for just one month, six months, a whole year etc
When you insure your shares this way before you rent them out, the strategy is called The Protected Buy Write and this is what I’m going to cover in detail today.
But hey…
If you don’t want to fork out the little extra cash you’d need to buy an insurance policy, you don’t have to! Many people don’t and it depends entirely on how comfortable you are with risk. I mean, how would you feel if the share price dropped a little just after you bought them? Would it bother you or would you feel quite comfortable with the daily price fluctuations?
Only you can decide what level of risk you are comfortable with. Personally, I always insure my share portfolio and I’m happy with that decision because even over the financial fallout this last couple of years, while loads of people have unfortunately lost ridiculous amounts of money, I’ve still made that regular cash flow.
(in fact, as an options trader, I made a motza when stock prices got smashed… but that’s another strategy we cover extensively in The Global Trading Room)
The choice is yours. If you choose not to insure your shares, you can still rent them out except now the strategy would be referred to as Writing Covered Calls.
The second thing I want you to consider is what stock you are going to use to rent out. Now, you may already own some shares and that’s great because you’re now going to learn how to leverage them.
Before you get started though, you need to find out if they are optionable stocks, that is, are you able to trade options over them?
This is something your stockbroker can help you with or you can follow this link learn option trading
If you don’t yet own any shares, you’ll need to consider which stock to select for this strategy and to do this we use a combination of fundamental and technical analysis.
(There is a select criteria we look for in each company before we even consider finding the right entry signal on the technicals) For the purpose of showing you how this strategy works, let’s assume that you have already selected some Blue Chip shares.
Follow the link to download your step by step guide to Renting Shares
http://www.globaltradingedge.com/PBW.pdf