Endless Income Wheel, Spoke 1: Get Paid to Name Your Own Entry Price Special Report www.bonnerandpartners.com From Jim Nelson and Kelly Green, Editors, Legacy Income Trader Price is everything these days. The income inequality gap continues to widen. Inflation eats into wages. The average income of an American is half what is was in the late 70s. It s no wonder consumers have a price-overquality mentality. As a consumer, you make sure your dollar is going as far as you can stretch it. You wouldn t want to pay too much for a new car or a new refrigerator. So why would you want to pay more than you have to for your investments? Maybe you don t realize you re paying too much for your stocks. Or maybe you don t know there is a way you can name your own entry price. Today, we ll show you how It gets even better we show you how you could actually get paid to name your own price. By the end of this report, you ll see how easy it is to lock in double-digit yields while locking in some of the best deals around. The most common reason investors pay too much for a stock is because they don t actually know what that stock is worth. If the market is taking off, it s easy to get caught up in the bull-market mentality. Taking a look at the S&P 500 over the past few years would make it easy to believe stocks will just keep going up especially if you look at blue-chip giants. Companies like Wal-Mart and Johnson & Johnson aren t going anywhere. They have demand for their products and solid balance sheets. But at the core, are they overbought? Would getting in right now really be the best price you could get? Remember, as share prices go up, yields go down. So when you re adding any stocks to your portfolio to collect additional income, it s even more important to lock in a low price so you re receiving the shareholder value you should be getting, in exchange for the safety of these investments. The second reason investors pay too much for a stock is because they don t know how to name their own entry price. When you go to buy a car, it s an easy concept to understand. You start negotiating with the salesperson the end result hopefully being a sale at a price you re content with. You can do this in the stock market too. And we re not just talking about using a limit order and hoping the stock dips to your desired price. We are talking about using the options market but in a way that most people don t. Before you dismiss our
strategy as too risky, you should know that this strategy will allow you to collect extra income, lower your risk and lower your cost basis. It s really almost too good to be true. Instead of using an options contract to place a gamble, we like to use it as an income generator, and to play the part of the dealer. We lock in the house advantage. We ll show you all the details of these trades. Once you see how lucrative this method is, we re sure you ll be hooked. What s even better is we do all the research and work for you. Once you re set up, all you have to do is receive our alerts, make a click of the mouse and collect income. Let s take a look at shares of Coach Inc. (NYSE:COH). At this writing, shares of Coach are trading for around $35.99. We re going to say hypothetically that we don t think shares of Coach are worth a cent over $35. We could simply hope and pray that prices dip back below $35. If we re going this route, we could also use a limit order. But more often than not, this approach won t get you anywhere. Shares may never come down in price. Even if they do, it might not be for several months. We instead could use the options market to put in this offer. In exchange for this open offer, we could get paid an extra guaranteed $100. That would be a 2.85% yield for a 47-day window. That s nearly six times what you ll get from your savings account in a whole year. And we re going to lock in that yield in just 47 days. Annualized, we re locking in 22.18%. Not too shabby for being frugal! You probably think this is too good to be true. Let s take a step back and break down this trade step by step. How It Works As we explained in your first report The House Always Wins, there are two types of options in the market: calls and puts. In order to name our own entry price, we ll become the seller or writer of a put option. You ll remember from the last report that there are three outcomes when you enter into a put trade with a gambler. Two of them result in keeping the gambler s up-front buy-in and not having to buy his shares. The third outcome results in you keeping the up-front premium and acquiring his stock. If you are forced to buy the gambler s shares, you get them at the entry price you named and locked in at the beginning of the contract. It s that simple. As a refresher, a put contract is an agreement between the option s writer (you) and its buyer. In this agreement, the put buyer owns shares of some company. You would like to buy those shares. You, as the writer of the contract, are going to make the option buyer an open offer to take his shares off his hands in the future. You ll tell him he has the option, but not the obligation, to sell you his shares during a certain period. If the option is exercised at any point, you ll legally have to buy those shares. But here is the catch. You agree upon the price today the price that you name. The shareholder thinks there is a possibility that the value of his shares is going to drop. He wants to make sure he has a buyer lined up, just in case. That s you. 2 www.bonnerandpartners.com
He wants to lock in his exit price. You want to lock in your entry price. But he s the one gambling on it. We re just giving him the opportunity to make that bet. In exchange for this wager, he ll pay you a premium today. So, to recap You ll write a put contract saying you ll buy shares (that you would already like to own) at any point between now and an end date for a specified price (which is lower than the market price). The buyer of this contract will pay you today to have this opportunity. The end date is known as the expiration date, and this specified price is known as the strike price. You ll also need to know that each contract is good on a block of 100 shares. Let s go back to our example with Coach. We want to buy our shares for $35. This will be our strike price. Now, we just have to figure out how long we want to leave this window open for our contract buyer. And we ll want to know how much of a premium we ll be able to collect up front. Collecting a Double-Digit Annualized Yield in One Easy Step When looking up a stock quote on your broker s website, there is usually a tab for options. This will show you the available option contract choices that you could write a contract on for that stock. We used etrade for the screenshot below. Take a look: We took this screenshot on August 5 (you can see a fullsize image at the end of this report). This shows the market premiums for available call and put options on Coach with an expiration date of September 20, 2014 (so, clearly this is just an example). Yes, the screenshot shows both types of options. You always want to double check that you re looking at the correct type of contract. This time, you ll want to notice the right side since those are the puts. You ll also notice across the top you can select other expiration dates. There are a number of conditions we take into consideration when choosing our expiration date and price. Generally our recommendations fall between two and four months. When combing for this example, we found the September $35 options gave us a desired yield. *NOTE: We are not making this recommendation now. It is only a hypothetical that we would have made on August 5*. It s important to take into consideration how much time you re giving the gambler to exercise his option as 3 www.bonnerandpartners.com
well as how much room there is between the strike price and the current option price. Since we want to get our shares for $35, we ll look at the row to the right of that strike price. The contract will either be exercised meaning you ll have to buy the 100 shares of Coach at your named price. Or the contract will expire worthless meaning you didn t have to do anything else, you are happy with your extra income and you can sell another put for another chance to name your entry price. Let s take a look: These last traded for $1. A contract is a bundle of 100 shares; therefore, you would collect $100 to write a contract. That $100 is yours today. You ll keep that whether or not the contract buyer decides to sell you his shares or not. The exchange for that up-front premium is the obligation to buy those shares at $35 anytime between now and September 20. This means you ll want to have $35 per share available just in case, or $3,500, since you ll have to buy 100 shares. 1. If shares don t move at all, the shareholder isn t going to want to sell his shares. If he can get $35.99 by selling them on the market, he s not going to make you buy them for $35. This means you ll keep your upfront premium of $100, plus you still have your $3,500 in your account to cover writing another contract. And you ll get to use that money to collect another premium. But you re getting paid to keep that money available. A lot more than if you would let that money sit in a savings account which would barely yield more than tucking it under your mattress. You re making $100 off your $3,500 right now. That s 2.85% in 47 days (the length of the contract). Annualized that s 22.1%. But what if you re forced to buy those shares of Coach... Possible Outcomes of This Trade There are only three ways a stock price can move between now and the expiration date. The price can stay the same, move up or move down. These movements will cause one of two things to happen to your options contract. 2. If share prices move up, the shareholder isn t going to want to sell his shares either. He ll be able to get more than $35.99 by selling them on the open market meaning that your $35 offer isn t attractive. Again, this means you keep the premium and the $3,500 you set aside. And you can write another contract, collecting more income. 4 www.bonnerandpartners.com
Endless Income Wheel Spoke 1: Get Paid to Name Your Own Entry Price And even if that were the case, we locked in our shares for the price we named. We know Coach is a solid company going through some changes, and we ll collect a dividend within the next three months. Not to mention, we have a surefire way to unlock bonus income from any stock we actually own. Collecting Your First Check as Early as Tomorrow Once your account is all set up for options, making a trade is incredibly easy. (If your account isn t set up for 3. If share prices go down, this is the only outcome in which the shareholder is going to want to sell his shares to you. And because of the contract, you re going options yet, no problem. We ll go over that in detail for you in your final special report, Introducing the Endless Income Wheel Strategy. ) At this point, you ll simply enter the ticker symbol of the to oblige. If shares are trading at any price under $35, the shareholder is going to sell you his shares instead stock and find the put options section. Once you select the of selling them on the open market. The shareholder is expiration date you re interested in, you can go down to the happy he was protected against the price dropping. We re strike price and click to place your order. For these trades, also happy because we got in for our desired price and you ll want to make sure you re selecting sell to open we also collected that premium up front. because you re opening a new contract as the options seller. You ll then select the number of contracts you want to open. Remember, each contract is on a block of 100 shares. You should always make sure you have enough money to buy 100 shares for each contract you sell. For example, since the strike price in our Coach example was $35, you ll want to make sure you have $3,500 for each contract. You ll want this money available in your account at all times during the time of the contract, since the buyer can exercise his option at any point. Finally, you ll still want to use a limit order when selling The only way we have a loss is if the price of the these contracts. This is the absolute minimum you would shares drops below the strike price by more than what want to sell your contract for. When we give you a trade, we collected in the premium. That means that shares of we ll give you a sell for no less than number. Like we said, Coach would have to be trading for less than $34 ($35 we ll give you all the details with each trade recommendation strike price minus our $1 premium). we make. 5 www.bonnerandpartners.com
This sell for no less than number is the minimum that we think you should sell your contract for. We re sure that once you make your first trade, you ll be hooked and you ll realize just how much income you can collect from some of the safest companies we can find. And if you put the stock, you ll see just how easy it is to get in for your named entry price. But this is only the first step of our overall strategy. Make sure you read the next two reports, so you have all the information you need to unlock endless income. Our full system allows you to collect income over and over again. And as always make sure you re keeping an eye on your inbox for our next flash action recommendation. Still have questions? Don t worry we still have two reports for you that will clear everything up. And, as always, you can ask us anything by emailing us at legacytrader@ bonnerandpartners.com. Publisher Will Bonner Editors Jim Nelson, Kelly Green Graphic Designer Heather Gorsuch Customer Care: Call (800) 681-1765 9 a.m. to 5 p.m. ET www.bonnerandpartners.com Bonner & Partners Legacy Income Trader is published by Bonner & Partners. Registered office: 14 W Mount Vernon Place, Baltimore, MD 21201, United States. Postmaster: Send address changes to Bonner & Partners, 1001 Cathedral St; Baltimore, MD 21201, United States. 2014 by Bonner & Partners. All rights reserved. No part of this report may be reproduced by any means without the express written consent of the publisher. The information contained herein is obtained from sources believed to be reliable. While carefully screened, the accuracy of this information cannot be guaranteed. Readers should carefully review investment prospectuses, when available, and should consult investment counsel before investing. NOTE: Bonner & Partners is strictly a financial publisher and does not provide personalized trading or investment advice. No person mentioned here by our writers should be considered permitted to engage in rendering personalized investment, legal or other professional advice as an agent of Bonner & Partners. Additionally, any individual services rendered to subscribers of Bonner & Partners Legacy Income Trader by those mentioned herein are considered completely separate from and outside the scope of services offered by Bonner & Partners. Therefore, if you decide to contact any one of our writers or partners, such contact, as well as any resulting relationship, is strictly between you and that service provider. Bonner & Partners expressly prohibits its writers from having a financial interest in any securities they recommend to their readers. All employees and agents of Bonner & Partners must wait 24 hours after an Internet publication and 72 hours after a print publication is mailed prior to following an initial recommendation on a security. 6 www.bonnerandpartners.com
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