How To Collect 9.6% Yields From A Stock Yielding 2.0%

StreetAuthority Network

By Austin Hatley 8 hours ago

I can’t believe more people aren’t taking advantage of this…

With bond yields near record lows and traditional income securities like savings accounts and certificates of deposit earning next to nothing, we’re regularly finding "instant yields" as high as 9.2%… 13.7%… and even some as much as 19.8%.

For instance, right now our research is showing an opportunity to collect a $1,575 cash payment from Visa (NYSE: V) for a 7.8% instant yield… a $980 cash payment from Starbucks (NYSE: SBUX) for a 12.8% instant yield… and we’ve even identified an opportunity to earn a $2,070 payment from International Business Machines (NYSE: IBM) for a 9.6% instant yield.

And the best part thing about these "instant yields" is that there’s nothing complicated about them. To collect, you don’t have to monitor your brokerage statement daily. Nor do you need a million-dollar bank account and access to a high-powered financial advisor.

In fact, all you really need is 100 shares of a single stock — and the willingness to sell those shares for a profit.

I’m talking, as you might have guessed, about selling covered calls.

If you read this recent issue of StreetAuthority Daily, then you know that a covered call strategy involves selling call options on stocks that you already own. In exchange for selling the options, you receive upfront payments known as premiums. These premiums can range from a few hundred dollars to $10,000 or more, depending on the size of your investment.

In exchange for paying the premium, the buyer now has the "option" to buy that stock from you for a specific price known as the option’s strike price. Whether or not he exercises that option depends on the stock’s price the day the option expires.

If, on that day, the stock is trading above the option’s strike price, you’ll be required to sell those shares — usually for a profit — to the option buyer. If the stock is trading below the option’s strike price, then the option expires worthless and you keep the premium with no further action required on your part.

[More from StreetAuthority.com: 33 Out Of 33 Winning Trades So Far... Here's How She Did It...]

Think about that for second.

I don’t know anyone who buys a stock without wanting to sell it eventually. Even long-term growth investors usually have a price target for most of their underlying holdings.

So why not get paid while you wait for your stocks to get there?

That’s essentially what covered calls allow you to do. By selling covered calls, you’re generating a constant income stream while waiting for your stock holdings to appreciate in value.

Since you already own the stocks you’re writing the options on, and you’re willing to sell those stocks when they reach your target price, employing this strategy adds zero additional downside risk…

But at this point you’re probably wondering: What if the stock declines in value?

In that scenario, selling covered calls can only help you.

Remember, to sell covered calls, you have to actually own the stock you’re writing the option on. So regardless of whether you use this strategy, your portfolio is still going to take a hit from the declining share price.

[More from StreetAuthority.com: How We Made 20.5% In 3 Months With Carl Icahn]

But the beauty of covered calls is that they let you offset some of the damage. That’s because for every premium you receive, you simultaneously lower your cost basis in that investment.

To see how it works, consider International Business Machines (NYSE: IBM).

Last year, the $206 billion IT services company was one of 39 stocks in the S&P 500 to finish 2013 in the red. All told, IBM fell from $192 a share in January to below $187 by December 31 — a 3.1% loss on the year.

As a result of that lackluster performance, I’m willing to bet most IBM shareholders lost money on the stock during the past 12 months.

But for people selling covered calls, IBM wasn’t nearly as much of a disappointment. In fact, chances are those investors actually made money on the stock last year.

That’s because for most of 2013, options investors were able to generate anywhere from $200 to $400 every two months by selling covered calls on IBM.

Just how much they received depends on both the length of the contract (how long until the option expires) and the value of the strike price.

[More from StreetAuthority.com: The Best Opportunity To Profit From Gold In 15 Years]

For example, right now IBM trades near $190 a share — very close to where it sat at the beginning of 2013. In order to generate what we call "instant income," investors could sell March $195 calls on IBM for $3.45 a share. Since each contract controls 100 shares, the trade would generate approximately $345 in "instant income." As long as IBM isn’t trading above $195 the day the option expires, you’ll get to retain your shares and keep the premium you collected as pure profit.

Since in this example the trade lasts roughly two months, you could repeat this process six different times over the course of a single year. Assuming you get roughly $3.45 every time you sell a call, you would essentially lower your cost basis by $20.70 ($3.45 x 6) for each share of IBM you own during that period.

So that means IBM shareholders who used a similar strategy in 2013 could have had a cost basis closer to $169.30 ($190 – $20.70) by the time the year was all said and done. So instead of losing 3% like everyone else, covered call investors could have earned as much as 9.6% by investing in IBM. And that’s before even considering IBM’s dividend, which currently pays another 2% annually.

That’s the power of this strategy. Regardless of what your portfolio looks like, you can dramatically juice your returns by selling covered calls. All you need is at least one stock you’re willing to sell at a profit if it jumps higher.

What’s more, while this strategy works great for big blue-chip companies like IBM, you can earn even more income — and get even higher returns — if you’re willing to use this strategy on companies that aren’t as well known.

Ivanpah Solar about to go online

$2.2 billion Ivanpah solar plant nears completion

Jul 30 – Brooke Self Desert Dispatch, Barstow, Calif.

The giant Ivanpah solar plant in the Mojave Desert approximately 110 miles east of Barstow and five miles west of the California-Nevada border will soon go online.

Construction on the $2.2 billion project is 95 percent complete and it’s expected to be operational by the end of the year, according to the latest update from the California Energy Commission and an official on the project.

"The California Energy Commission licensed the Ivanpah project in 2010 as part of the Commission’s commitment to support clean renewable energy, reinvigorate the state’s economy and bring jobs to California," Sandy Louey, a CEC spokeswoman said in a written statement. "The project will help meet the state’s Renewables Portfolio Standard, which requires increasing California’s amount of renewable energy to 33 percent by 2020."

BrightSource Energy, Google and NRG Energy are all owners of the Ivanpah Solar Electric Generating System, the plant’s official title. Construction on the project is largely being funded by a $1.6 billion loan guarantee by the U.S. Department of Energy, according to BrightSource’s official website.

ISEGS will provide enough energy to power 140,000 homes and will connect to the systems of both Pacific Gas and Electric and Southern California Edison, Jared Blanton, the communications manager for BrightSource confirmed.

"It is the largest solar plant of its kind (under construction) in the world," Blanton said.

The 377 megawatt project comprises three 459-foot tall towers and 170,000 heliostats, or mirrors, on 5.3 square miles of federal land, according to the BrightSource website. The mirrors will track the sun throughout the day and reflect solar energy to the towers. At each tower the steam emitted and piped from a receiver boiler will power a conventional turbine that generates electricity.

The Ivanpah plant will employ 86 people in permanent operation and maintenance jobs. It took 2,100 workers and support staff to build at the peak of construction. Construction began in October 2010.

Contact Brooke Self at BSelf

When I grow up …

Sent from my iPad
Doug Neeper
(925)-451-4541
http://www.dougneeper.com

Job: Billing Specialist and Pricing Administrator (Benecia)

Sent from my iPadDoug Neeper
(925)-451-4541
www.dougneeper.com

Begin forwarded message:

Hi Doug

We have another two positions to post on Job Connections. The Pricing Administrator is a newly created position reporting to me and the Billing Specialist is a replacement position. Can you post these please? Qualified candidates can apply at careers. Both positions are located in Benicia. Thank you.

On Wed, Apr 24, 2013 at 1:14 PM, Doug Neeper <doug.neeper> wrote:

[Attachment(s) from Doug Neeper included below]

Billing Specialist.BS.jd.doc
Pricing Administrator PA.jd.doc

Job: Account Manager: Work from home

Account Manager 2.docx

Inside Sales

Sr. Inside Sales Representative.docx

JOB: Inside Outside Sales (Alameda County)

Email resume to: rhonda

Job description – Sales Position #3.pdf

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