It’s a simple way to look at trading. But to me, a successful trade is one that makes money.

For most investors, this means you see a stock you like, do some research and then decide to pull the trigger.

At this point, of course, the hope is that the stock moves up and you book a reasonable return on your investment.

[ad#Google Adsense 336×280-IA]But if the stock moves lower or sideways, you’ll break even at best.

What if I told you that there is a strategy that makes it possible to profit from owning stocks that aren’t moving at all?

This isn’t just theory.

In my premium newsletter we’ve been able to earn market-beating returns time and again using what we call the Maximum Income strategy.

For example, MasterCard (NYSE: MA) was one of the first positions we opened back in February 2014. The trade closed in July, about five months later.

Over that period, the S&P 500 gained about 6%, while MasterCard only gained 1.3%. But by using my Maximum Income strategy my subscribers pocketed a 10% gain.

How is this possible?

While traditional stock investors sit back and hope to see gains, we use covered calls to actively earn the gains we want to see.

But before I explain exactly how we do this, let me show you several more of the 10%-plus gains we’ve earned by using covered calls.

As you can see, we’ve been able to earn double-digit returns consistently in just a short period of time with these stocks. And the great thing is that we didn’t need big upside moves from our stocks to pocket big returns. We can use this strategy to make money with the stocks we already own (or want to own) in any market environment.

Let me briefly explain what a covered call is, and then I’ll give you the details on my latest trade recommendation, which you can make today.

As a stock owner, you possess the right to sell your stock at any time. When you write a covered call, however, you’re agreeing to sell 100 shares of a stock that you own to someone else on a specified date (the expiration date), at a specified price (the strike price). In exchange for writing the covered call, you are given a cash “premium” immediately.

When I find an ideal stock and sell a covered call option, I’m looking for one of two desirable outcomes.

1.) Generate instant income and hold on to the stock: Selling an option produces income that is immediately deposited into the option seller’s brokerage account. If shares trade below a certain level at expiration, then you’ll pocket the instant income and still hold on to the stock.

2.) Lock in a gain by selling the stock: If shares trade above a certain price level when the option expires, then you’ll keep the premium and pocket the gains from selling the shares you own at a higher price.

Now here’s how you can use this strategy today…

United Rentals, Inc. (NYSE: URI) is the largest construction and industrial equipment rental company in the world, and I consider it to be undervalued and a buy at today’s prices.

But rather than just buying the stock and hoping for it to appreciate like most investors, I can use a covered call strategy to earn income now.

When the markets closed Tuesday, shares of United Rentals traded for nearly $89. Call options expiring in April with a strike price of $92.50 were trading around $1.15.

Selling these calls will generate immediate income of about $115 (each contract controls 100 shares). If you buy 100 shares of United Rentals at $89, it will cost you $8,900. But if you already own 100 shares of URI, then you’ll simply pocket the instant income.

So if shares of United Rentals trade for $92.50 or less on April 17 (the day the option expires), then you keep the $115 premium, earning 1.3% on your $8,900 investment in 24 days. That’s a 19.7% annualized return.

But if URI trades above $92.50 on April 17, then you’ll keep the $115 premium and sell your 100 shares of URI at $92.50 per share. That means you’ll book a profit of $4.65 per share ($92.50 – $87.85 cost basis; cost basis = $89 – $1.15), or $465 per 100 shares. This is a profit of 5.3% in 24 days. If we can repeat a similar trade every 24 days, then we’d earn an 80.5% return on our capital in 12 months.

In both scenarios, we have the possibility of earning double-digit annualized returns, with no more risk than simply holding the shares.

Here’s the great thing about this strategy… You can repeat it multiple times and scale it up as much as you want. And it works in almost any market environment.

Good investing,

Amber Hestla

Sponsored Link: Rather than sit around and hope your holdings appreciate, covered calls put you in the driver’s seat. We’ve been able to earn gains of 12.5%, 17% and 25% with this strategy so far in Maximum Income. To learn more about how covered calls can help you collect these kinds of gains each month, click here.

Source: Street Authority