One of the few innovations in equity markets in the past few years has been the introduction of weekly options. There are now more than 170 stocks, ETFs and indices with weekly puts and calls. As you might guess, speculators love the opportunities to double their money or more while at the same time paying little to nothing for the time value of an option. Good for them … but better for those of us interested in generating income.
Weekly options offer one of the lowest risk ways to generate consistent income over time. In my service Options Income Blueprint, we sell weeklies every week. One recent position speaks to the efficiency and profitability of selling weeklies.
On a Wednesday, we sold to open (wrote) the General Motors (NYSE:GM) February Week Two $28 put, collecting $15 a contract in premium. Sounds like too small a profit for all of you super smart traders? Well, two days later the puts expired worthless. The return on the capital was 0.65%. Tiny, eh? Do it weekly throughout the year and your return is 32%. Not so tiny.
To make this strategy work, you need low commissions and an account of at least $10,000. And you need to work it, meaning you need to stay on top of it because you will need to put on positions most if not all the weeks of the year.
I prefer selling weeklies on Wednesday, although last week I sold to open (wrote) Tiffany (NYSE:TIF) puts on Monday. Those produced an annualized return of 30%.
What looks good right now? Take a look at GM or Ford (NYSE:F). Oh, for purposes of full disclosure, I drive a Chevy Traverse.
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