It started out as a challenge to find a winning trading system. It turned out to be one of the best income strategies in the world.

From July 2012 to January 2013, I put my “Instant Income” strategy through a beta test as the folks over at ProfitableTrading.com looked over my shoulder. The results were even better than I expected. I helped readers generate thousands of dollars in income on my way to an 84% win rate.

Here’s how I did it… 

My “Instant Income” strategy allows investors to do one of two things: either earn large amounts of income… or buy high-quality stocks at a deep discount. Either way, it’s usually a win-win. 

It’s not for everyone, but I think it’s one of the smartest, highest-percentage, winning strategies in the financial world. It involves selling puts on undervalued, high-quality stocks.

To recap, “put” options give investors the right — but not the obligation — to sell a stock at a specified price before a specified date. Selling a put obligates us to purchase that stock from the put buyer if it falls below a specified price (the option‘s “strike price“). When we accept that obligation, we receive cash, or “Instant Income,” upfront (known as a “premium”).

My “Instant Income” strategy is no longer being tested. Six weeks ago, I started sending one “Instant Income” trade every Wednesday to a group of investors. We’ve already closed out two trades, and in both cases, we generated income without buying a single share of stock. 

Even better, every single trade I’ve recommended is currently trading above their strike price. I expect most, if not all, of the options I’ve recommended to expire worthless, which means we keep the premium as pure profit. Worst case, I might be required to buy shares of a stock I’d like to own anyway… and at a deep discount. Remember, for every put contract you sell, you may be required to purchase 100 shares of the underlying stock. 

To show you how investors are taking advantage of my “Instant Income” strategy, here’s an example of an open trade in my portfolio…

On March 6, I recommended readers sell April 26 puts on Questcor Pharmaceuticals (Nadaq: QCOR) for a premium of $1.30. That’s a put that expires on April 20 and pays sellers a $1.30 per-share premium, or $130 per contract (a contract is for 100 shares). If shares of QCOR trade below $26 on April 20, we’ll be shareholders at a cost basis of $24.70 a share ($26 – $1.30).

To initiate this trade, most brokers require a small deposit in your account, much like a down payment on a house. It usually runs about 20% of the amount it would cost you to buy 100 shares at the strike price, which in this case would be $26. This QCOR trade would require a margin deposit of about $520 per contract sold ($26*100*20%). That money will be returned if the option expires worthless, or will go towards purchasing shares.

When I sold the put, shares were trading at about $30, so our $24.70 cost basis represented a 17.7% discount. QCOR also sported an attractive forward price-to-earnings (P/E) ratio below 6. I’m more than comfortable owning the stock, but by selling puts, I collect “Instant Income” without having to purchase shares outright. 

Action to Take –> It’s been three weeks since I recommended that trade, and it’s doing well. QCOR would need to fall 18.6% in the next 17 trading days before we would have to buy, or “be put,” the shares. 

If the option expires worthless, we’d collect $130 in “Instant Income” for every $520 set aside. That’s a 25% return on a trade that lasted 44 days. If we can repeat a similar trade every 44 days, we’d earn a 207% return on our capital in 12 months.

Keep in mind that many of my recommendations can be time-sensitive, so you’ll need to act fast if you want access to today’s trade. To learn more about my “Instant Income” strategy and receive today’s trade, click here.