One of the best income strategies in the world involves a "glitch" in the financial markets. It allows individual investors to generate "Instant Income" from the best companies in the world. The best part, more than 80% of the time, in my experience, investors don't have to buy a single share of stock.
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I've been using this strategy to deliver winning income trades for readers during the past few years. The results have been great -- my strategy has allowed us to enjoy thousands of dollars in "Instant Income."For example, we made $2,700 "Instant Income" from a $6,400 "down payment" on MasterCard (NYSE: MA). That's an immediate return of 42.2%. I've collected $710 from Amazon (Nasdaq: AMZN), a company that's never paid a single dividend. I could go on and on...
It's clear that this the strategy has a lot of income potential. Yet, I'm willing to bet that 95% of investors aren't taking advantage of the "glitch" to generate income.
And I think I know why...
My "Instant Income" strategy involves one of the most misunderstood corners of the investing world: the options market.
Many people avoid options because they have a reputation for being risky and complex, but the strategies I use are safer and simpler than you might imagine. In fact, my strategy takes advantage of risk-takers to generate steady income.
Many options traders lose money for one simple reason -- they're on the wrong side of the trade. In fact, more than 80% of options are worthless when they expire.
That may sound like a bad thing, but it's actually what makes my strategy successful. It involves selling, not buying options.
When we sell an option, we get money deposited in our brokerage accounts. It's called a premium, but I like to call it "Instant Income." We get paid upfront for options that more than likely will expire worthless in a few months -- meaning we don't have to buy shares and our "Instant Income" is pure profit.
It's this "glitch" in the options market that allows us to generate steady income from selling options on high-quality, undervalued stocks.
For example, with one option strategy I use, selling "put" options, one of two things can happen.
1. You receive "Instant Income" when you sell the option and keep it as pure profit -- without ever having to buy a stock.
2. You get the opportunity to buy shares of a company you would want to own anyway -- but at a discounted price. You'll even know the price up front before you ever make the trade.
Let me show you a recent example...
On May 9, I recommended readers sell June $31 puts on U.S. Steel (NYSE: X) for a premium of $51. That's a put that expired on June 15 and pays sellers a $0.51 per-share premium, or $51 per contract (a contract is for 100 shares). If shares of U.S. Steel had closed below $31 on June 15, we'd now be shareholders at a cost basis of $30.49 a share ($31 - $0.51, our premium).
When I sold the put, shares were trading at about $35.20, so our $30.49 cost basis would represent a 13.4% discount. U.S. Steel also sported an attractive price-to-earnings (P/E) ratio below 7. Because the stock is deeply undervalued, I expect that valuation to attract bargain hunters for now, so I would have been more than comfortable owning the stock. But by selling puts, I could collect "Instant Income" without having to purchase shares outright. And if U.S. Steel traded below $31 when the options expire, I'd have owned shares at dirt-chap prices.
It's been a handful of weeks since I recommended that trade, and the put option I recommended just expired worthless. Honestly, I wasn't surprised. As the expiration date approached, X was still trading up around $35 -- in fact, it never once closed below that level while my trade was open. U.S Steel would have needed to fall more than 11% before we would have had to buy, or be put, the shares. This means the $51 in "Instant Income" per contract was pure profit (an 8.2% gain) on a trade that lasted only 38 days. All in all, if we can repeat a similar trade every 38 days, we'd have a gain of 79% by the end of the year.
This "Instant Income" strategy isn't for everyone. In fact, readers with less than $25,000 shouldn't use this strategy. But I explain all this and more in a special presentation I put together...
In it, I'll tell you more about the "glitch" in the financial markets that's allowing me to generate thousands of dollars from some the best companies in the world. Click here to learn how to get started now.
This article originally appeared on StreetAuthority.com.