1.) The Covered Call - Renting Your Stock
Possibly the most popular options strategy in use by every day investors is the covered call. With this strategy a stock owner may sell someone else the right to their stock. If the stock remains low the original owner maintains ownership. This is an amazingly powerful way to create income on lazy stocks (stocks that just sit around and don’t go anywhere). Depending on exactly which option you sell you can generally create about 10-15% of your stock’s value every month you sell the option. If you manage to do that for 10 months, your original investment would pretty much be recouped and you would be sitting on a stock position with absolutely zero risk and nothing but pure profit (that’s how you get an infinite rate of return!).
2.) The Covered Call Improved - Subleasing a Stock
Okay, so it sounds nice enough that you could rent a stock you own, but what if you’re one of those people who don’t own any stock. Well fortunately we can twist this strategy just a bit to make that possible.
When you don’t own a house how do you get a place to live? You rent. If you don’t own a stock but you want to use it what can you do? Rent. You could rent a stock from somebody and now you are the rightful possessor for a limited time. During that time period you can do anything you want with that stock. So why not rent it? Or shall I say sub-lease it?
When you don’t actually own a stock you can still buy the rights to that stock and then turn around and sell someone rights against your rights. Just like renting and sub-leasing. The spread, or difference in price, is your profit. That profit can vary but if you do it right you should be able to generate at least a 20% profit each month - yea that’s right, I said each MONTH.
3.) The Calendar Call
Now I’m going to show you the most powerful way you can combine these strategies. The benefit of owning a stock is you have it right? It’s paid for, you can do whatever you want with it. Well what if you sign a long term rent agreement for that stock? That means you would have the right to own it for a long time. How long? Let’s be simple and say 2 years. Now that you have secured the future price of this stock you can rent it for the next 2 years - every month! As the value of the property (the stock your renting) goes up, your profits will go up in a huge way. In fact it’s so huge I can’t give you a percentage return that you could expect. Depending on how fast you break even, which could occur in a month, everything after that point is pure profit which ultimately becomes infinite.