Almost one year ago, Ian Wyatt and I started an income service called High Yield Trader and made our first investment for the portfolio…buying Microsoft.
The idea was to buy shares of blue-chip, shareholder-friendly companies… and then sell someone the right to buy those shares from us at a higher price.[ad#Google Adsense 336×280-IA]The practice is better known as “covered calls.”
Our original goal was to double the dividend of every company in the High Yield Trader portfolio
I can proudly say that we’ve managed to far exceed our expectations.
After just one year we’ve more than doubled the dividends.
In fact, we’ve made 3x, 4x, 6x, 8x, even 13 times the dividend of each company in less than one year.
Here are five examples of the income we’ve managed to lock-in over the past year selling covered calls.
If you’re willing to learn the basics of our covered call strategy, you can still use the stocks above among 10-15 additional holdings in our portfolio to safely collect more than 10% per year.
Let me show you how it works…
In our original trade back in late April 2013, we noted how you could buy shares of Microsoft (NASDAQ: MSFT) for around $31.50 and simultaneously sell the June $34 calls for about $0.40.
In other words, we bought shares for $31.50, and then sold someone the right to buy them from us for $34 per share.
We earned a “premium” – also known as income – of $0.40. And that provided us with an immediate 1.3% yield on the original stock position. And the options had a lifespan of less than two months.
So the 1.3% return was an “annualized” gain of about 8%.
But by the time our June $34 calls were to expire, Microsoft was trading for over $34. So we were forced to sell our shares for $34. As a result, we pocketed a capital gain of 7.9%, plus our 1.3% in call premium for a total return of 9.2% in just two months.
To drive the point home, let me cover the trade in “real money” terms…
We bought 100 shares of Microsoft for $3,150. We collected $40 in super-low-risk premium for selling covered calls on Microsoft. And we continue to sell calls until they are called away. Once that occurs we just buy the stock again and repeat the process.
A 10% annual income stream on the $3,150 stake is $315. That’s an extraordinary amount of extra income coming from a great blue chip stock like Microsoft. And remember that’s only based on the bare minimum of 100 shares.
Now… you might be thinking, “You’re not telling us the full story. You can’t repeat that trade all the time.”
But… two months later… in late June, I essentially made the same trade with the same stock. We were able to bring in another 1.5%. Not only that, but we did it once again in August, October, January, February and more recently March.
So far we’ve managed to produce a total income of 23.6% over the past year.
Keep in mind, Microsoft shares didn’t have to “soar” for us to earn this extra income. We made money as the stock climbed, moved sideways, or even declined a little. Gold Miners, another High Yield Trader holding, actually pushed lower 10%, yet we still managed to bring in 21.4% in income.
The best news is that you can do this again right now. Today, you can buy Microsoft for around $39.50 per share.
All you have to do is learn the basics of our approach and immediately put them to work for you.
— Andy Crowder[ad#wyatt-income]
Source: Wyatt Investment Research