Stock Market musings

July 11, 2011 (Remember this is a snapshot in time)

STOCK MARKET.
What a bad day in the market. There is a lot of fear about the debt crisis---both here and in Europe. I just wish the guy in the White House would be quiet and go to his room. He's grounded.
There are many stocks that currently are in a good buying range. Let me give a few and also the covered call possibilities. When I talk about covered calls, and if you do not follow then get my books. Wall Street Money Machine would be a good start, but I also think Stock Market Money Machine is the best for covered calls. It's a single topic book. If you want to generate monthly income then it's the way to go.
For example: I looked at RenRen (RENN), a recent Chinese IPO. It's supposed to be the Face Book of China. It came out on the IPO at $14, ran up to $24 and then backed off to $6 plus, with the negative news about Chinese companies. I think many of these will go back up. Most already have. Check out BIDU, SINA, BORN, and others.
Back To RENN. The stock was at $9.90 earlier. The August $10 calls were about $1.20. Here is how it works. In a covered call situation you first buy the stock, in 100 share increments. Then you immediately, or wait for the stock to rise, sell an option. Get this: I did not say buy a risky option. You sell it against your stock position. This is what covered means. Buy selling the option you have taken in cash. In this case, $1,200 and you have agreed to sell your stock at $10 anytime on or before the 3rd Friday of August. If the stock is above $10 you will sell it, or what we call, getting called out.
If you want to make extra money, you can buy back the option, end the obligation and sell another option. One time I took on stock and sold the calls and bought them back for 13 months. I started with $5,250 and made (actual cash) $16,150. All of this is documented in STOCK MARKET MONEY MACHINE.
Later, I'll write more on double dipping. We used to show people how to get 20% a month---cash on cash---writing covered calls. Today, that is very difficult to do. Getting 10% a month is doable, but even that number takes a bit of understanding and work. 
Ask your self this: If I put up $9,900, or 1/2 of that on margin, or $4,500, and make $1,200 for 5 weeks, plus another $100 in capital gains if you get called out, is it worth it to learn more, and practice trade this type of activity. I contend that if you have $20,000 and learn this system, and pay attention, you can make $2,400 to $3,500 a month (depending on your use of margin). If you use no margin buying then you can (it's possible) the lower amount, which is still phenomenal.
Look at MBI, NG, BORN. There are many others, but enough for now.
Wade