3 Smart Ways To Pay What You Want For Stocks

David Goodboy's picture

Wednesday, November 7, 2018 - 2:30pm

by David Goodboy

Imagine having the magical ability to name your price for whatever stock you desire.

Rather than being forced to pay market price your strategy allows you to pay what you consider to be a fair price for any stock. Think about the advantage you would have!


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Well, winning investors often pay not a penny more than they wish for stock, regardless of where the shares are presently trading.

There is nothing magical about it.

Of course, these tactics don't always work, and there are caveats you must understand before implementing a strategy. That said, using methods to pay what you want for a stock is a time-tested way to consistently earn outsized profits from the stock market.

1. Sell A Put
Selling puts is a very useful way to pay what you want for a stock.

The best thing about selling puts is that even if you are not able to purchase the shares at your price, you get paid for trying.

In fact, many investors earn a consistent income by merely selling puts without buying the stock at the chosen price. Most income creating investor's do not want to own the shares. Their hope is not to be forced to purchase the shares at the lower price. They have a goal of merely selling puts every month and collecting the steady stream of income via collecting the option's premium. Using the tactic with the purpose of buying the shares is merely a twist on this proven tactic

The way it is accomplished is straightforward.

Directly, sell one put option at the strike price for every 100 shares of the company you wish to purchase at the strike price.

I like to sell the put in the current month expiration period rather than further away in time. The reason not to go further out in time is the faster you can sell the same strike price at the next month is the faster income can be compounded if the stock is not sold (put) to you.

I know you are probably very concerned about selling naked options, but don't worry. Only two things can happen when you sell a naked put.

The first thing is that the stock price never drops to the put's strike price.

Although you will not be able to purchase the shares at your chosen price, it is a great thing to happen.

This is how you get paid without actually buying the shares. This strategy is used by wealthy investors to obtain a continuous income stream from the stock market without actually owning the stock.

The only other thing that can happen is that the stock price will fall to or below the strike price of the put. If this occurs, you will have to buy 100 shares of stock for every put that you sold. Remember, this was the goal in the first place, so be happy! Not only are you able to buy the stock at your chosen price, you got paid for doing so via the premium received for the put.

With the right goals, selling puts can be an excellent way to pay what you want for stocks.


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2. Set It And Forget It
This method eliminates the need to have to sell a put first. Although you do not get paid for buying at you chosen price, it is a highly effective tactic to assure that you only spend what you want for the shares.

Setting it and forgetting it means setting a good until canceled buy limit order at the price you want to pay.

The stock may never make it to the price, but you will be ready when and if it does with the buy limit order.

For example, should a stock be trading at $25.00 per share and you want to purchase it at $18.00 per share, you set a buy limit order at $18.00 per share. Your order will be executed at $18.00 per share or better, meaning at a lower price.

It's important to remember that buy limit orders are not guaranteed to be filled, and, when filled, it is at the ask not bid price.

3. Be Patient
When you identify a stock that looks great, the temptation is to buy at the current price. However, it is usually smart to be patient and wait for the price to drop before buying.

Using patience, rather than fixed buy limit orders, allows for more flexibility with execution timing. As such, waiting to enter is best suitable for active investors. In other words, it works if you are actively monitoring the market and are an experienced trader. Buy and hold type investors would be best to stick to the first two tactics for paying what you want for stock.

Risks To Consider: Buying stocks at a lower price can be a great thing. However, it can also work against you. Often stock prices will continue to lower after entering, therefore using stop-loss orders is a must in all circumstances!

Action To Take: Consider using the above tactics to pay what you want for stocks.

David Goodboy does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.