33 Out Of 33 Winning Trades So Far… Here’s How She Did It…
Anytime you can boast a 100% win-rate in anything, it’s nothing short of remarkable. The best political pundits struggle to predict how an election will turn out… Meteorologists often miss forecasts for where and when the next hurricane will hit… even the best baseball players only manage to get a hit 30% of the time.
And when it comes to the stock market, as we all know, even the brightest minds in the business can get it dead wrong.
But somehow, Amber Hestla, Chief Investment Strategist of our recently-launched Income Trader newsletter, has managed to pull off a 100% win-rate on every single one of her recommended trades.
#-ad_banner-#I challenge you to find a single stock picker, market pundit or investment manager that can say the same thing about their record in 2013.
Can Amber’s run continue? Well, nothing last forever. But one thing is for certain — her record so far has been nothing short of impressive. But how has she managed such an amazing streak?
We’ve talked a lot about Amber’s Income Trader newsletter recently. You can view our previous articles on the subject here and here.
For the newcomers, here’s the rundown. Amber generates extra income by selling put options on stocks that she wouldn’t mind owning. These options give buyers the right — but not the obligation — to sell a stock at a specified price (the option’s strike price) before a specified date. These “Instant Income” checks, as she calls them, usually range anywhere from $100… to $150 … to even $200 per contract. (Many of her readers scale up to collect $2,000 or more in income per trade).
Most of the time (93% of the time in Amber’s experience) the options expire worthless and the money she receives from selling the puts is hers to keep as 100% profit (when a put expires worthless, no further action is required by the seller).
For example, in Amber’s July 2 issue of Income Trader she recommended selling puts on F5 Networks (Nasdaq: FFIV), a Seattle-based tech company with its foot in the billion-dollar IT security industry. At the time, Amber liked the stock for its strong fundamentals. As she told her readers:
F5 is a great company with strong financials. The company is debt-free and reasonably valued.
In addition to the standard review of financials on FFIV, I’d like to add a chart showing how the company compares to others in its industry.
FFIV is performing significantly better than average in each of these measures and every other metric I checked.
Her recommended trade was…
On Wednesday, FFIV closed at $87.75. This week, I recommend selling the FFIV Oct 70 Puts for $0.75 – $0.95.
Selling these puts will generate immediate income of about $85 (each contract controls 100 shares), assuming you enter the trade near the middle of the range. This put will obligate you to buy FFIV at $70 a share if the stock trades for less than that on Oct. 18 (the last day these options can be traded).
Her analysis was spot on. On October 16 (the day the option expired), FFIV was trading at $86 a share — over 23% above her recommended strike price. As a result, Amber’s subscribers were able to pocket the “Instant Income” as pure profit.
Generally speaking, that would be the end of it. Given the short-term nature of these trades, normally they’re only good for a few days — maybe a week at most.
But last week, Amber got a second shot at this trade. On Tuesday, shares were trading at $85, 3% below where Amber originally recommended selling puts on it.
As a result, Amber recommended a similar trade on FFIV. As she told her Income Trader subscribers:
The original trade I recommended on FFIV in July is still good. The stock’s price is little changed since then. The company is still undervalued in my opinion and presents a perfect income trading opportunity.
To capitalize on the opportunity, Amber recommended selling January puts with an $80 strike for a $1 a share. Since each options contract represents 100 shares, the trade generated roughly $100 in “Instant Income.”
As of Friday’s close, FFIV had already risen 3% to $88 a share — nearly 10% above the $80 strike price that Amber recommended for the trade. Given this company was already undervalued to begin with, chances are it will unlikely fall below $80 a share on January 14, the day the option expires. (Keep in mind, the stock has ran up since Amber’s udated recommendation, so she doesn’t recommend investors make this trade today.)
But even if the stock falls below $80 and her subscribers are assigned the shares, it’s still not the end of the world. Remember, Amber still thinks this is a good company. So on that off chance that the put doesn’t expire worthless, her subscribers will simply be buying shares of a high-quality stock… and at a discounted value.
That’s the power of using put options in your portfolio. While there’s no such thing as a win-win investing strategy, from our experience selling puts like the ones Amber does in her Income Trader portfolio is about as close as it gets.
Note: So far, Amber’s options selling strategy has proven wildly successful. Since she launched her newsletter, Income Trader, all 33 of her closed trades have been profitable — giving her (and her subscribers) an average annual return of 68.4% per trade. To learn more about Amber’s winning strategy, follow this link.