We've had another great day in the market. The Dow was up 250 points. And if you look at the information/news it's almost all outside of corporate earnings---again, a classical red-light period. In fact, it's educational what a global economy we live in. Most of the increase was due to an easing of the European debt crisis. I still think the next two weeks will be tough.
But for now, we'll take good news where we can find it. Bank of America was up nicely. Check out FAS. I think it bears study.
I'll be back with you when I get more prices. I'll be writing a blog, attempting to make about $2,200 to $2,500 on $20,000 put up---FOR SEPTEMBER. No sweat for October.
Let me give one quick example. I don't know what RenRen (RENN) did today, but yesterday's closing prices showed the following: the stock was at $7.03. The October $7 calls were 90 cents to sell. Say, we buy 1,000 shares, costing $7,030. Now sell a covered call for 90 cents times 1000 (10 contracts of 100 each contract). Take in $900 cash now. You are selling to someone the right to buy your stock for $7 per share. You sell away the upside---everything above $7---but you're getting paid handsomely to take on this obligation. We're not buying options but selling them to the crazies who like to buy them.
This is an awesome cash flow. If you get called out you have to give back 3 cents per share or $30, but you get to keep the other $870. If the stock stays right around $7 and you don't get called out (sell), then you get to keep the whole $900, and you can then sell the November options, pocketing more cash.
You'll see similar numbers with BAC, MU, and others.
If the average family had three or four positions like this they could retire. 4 times $900 equals $3,600. That would be $28,000 straight up, or $14,000 on margin. It's a cash flow machine. When will you retire?
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