If you want to own a stock for yield and yield alone, and not sell calls, no.
If you want to own a stock for yield and sell calls, yes.
And right now, the best way to turn AAPL into a high yield stock is to execute a put selling strategy.
I sold an Apple May put a few minutes ago. The May $450—they expire in six trading days. I got $3.58 a share. Assuming I do this fifty times a year, and they expire worthless half the time, and I buy them back for 50% less than I sold them 25% of the time, and I need to roll them for a week another 25% of the time AND have to buy them back for half of what I sold them for – a reasonable set of assumptions – I generate $121 a share. That, my friends, is a return of 26.89%.
Whoa, that is a lot assumptions. Yes, what appears to be confusing is actually quite simple – this is the reason many people do not sell puts, to their loss. So let me walk through those assumptions because they illustrate how to do this, right now.
- Based on the track record in my service Options Income Blueprint, well more than three quarters of the puts we sell expire worthless. More than 85% of all options expire worthless so this is not surprising. You need to know a company and a stock and how it trades short term, but it is easily doable by anyone willing to work at it a bit. You sell a put about a week or so out, you let it expire worthless or buy it back for pennies.
- About 5% of the time I buy back a weekly option before it expires – I assumed 25% because many of you do not sit at your screens and may want to close a position on a Friday rather than wait out the market. If you like to buy back puts find a broker – there are many – that do not charge commissions for trades of options a nickel or under.
- About one time in ten when I sell a weekly option I need to buy it back and sell one for the next week – this is called rolling. Again, I used 25% as a number just to play it safe. I just did this with Apple – I had sold a weekly in March, the $460s – very bad timing on my part – rolled them a couple of times and bought them back with a small (4% annualized return) this week.
So using these tactics with a super liquid, easy to trade stock like Apple you can get 27% — or more – even when the stock is seesawing up and down.
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