Collect A Year Of Dividends Instantly With This Strategy

Michael Vodicka's picture

Thursday, March 10, 2016 - 10:30am

by Michael Vodicka

Interest rates are at record lows across the globe. In the United States, the S&P 500 offers a dividend yield of around 2%, barely enough to keep up with record low levels of inflation. Fixed-income securities are even worse. The iShares 10-20 Year Treasury Bond (NYSE: TLH) is yielding 2%, close to an all-time low.

CDs and savings accounts offer virtually no return. In this environment, investors are desperate for strategies that will help them generate consistent and reliable income.

Most investors are content to stick with dividend-paying blue-chip stocks in defensive industries.

This makes sense. Stocks like Verizon (NYSE: VZ) are not particularly sensitive to economic cycles. Even if the economy falls into a recession, very few people will cancel or change their mobile service. That's why Verizon was just one of a few S&P 500 companies able to grow its dividend through the financial crisis in 2008 and 2009.

Its current 4.4% yield ranks as one of the best dividends in the S&P 500 -- well above the index's average yield of 2%. I also consider Verizon to be one of the safest dividends in the S&P 500.

But what if I told you there was a chance for income investors to do even better?

As it turns out, there is.

I know from my years of experience as a former bond trader and private wealth manager in Chicago that there are other, more lucrative ways to get income than simply waiting for dividend checks to come in. In fact, thanks to a little-known yet thoroughly-proven strategy, there is a way to multiply the income we can earn from stocks like Verizon and reduce our long-term exposure risk to holding the stock should the market tank, say, six months from now.

To do this, we use put options. Now, don't let that scare you. With interest rates this low and choices limited for income investors, it's my firm belief that you need to be willing to try new strategies.

You see, I've spent the past few years developing a proprietary system of identifying the safest, highest-probability options trades for investors regardless of what the overall market is doing. In fact, my Income Multiplier subscribers have used what I call my "safe money" strategy to collect $872.80 in extra income every 9 days on average for 24 months straight -- without a single losing trade.

Options strategies like the one I use are not that complicated, either. Once you get up to speed on the terminology, it's easy to understand how they work...

Let's say Verizon is trading at $51. I want to buy shares, but Verizon has been on a hot run lately and I'm worried about the broader market.

This is the perfect time to utilize a put-selling strategy. Not only can selling puts generate income, it also provides downside protection against market weakness and gives me a chance to buy shares on a pullback.

Focusing on the key variables of my "safe money" strategy, I decide I want to sell puts that expire on April 15 with a strike price of $49. (Don't worry; I explain more about this in my special presentation, which you can find here.)

When I look up Verizon's options through my online brokerage, I see I can sell put options with a strike price of $49 that expire in less than 45 days for $0.51. Since an options contract represents 100 shares, I can multiply that $0.51 by 100 to calculate the income I will collect on one contract.

In this case, selling puts would generate $51 for my account. Considering the brokerage firm would probably require a "down payment" of $980 for the trade (20% of 100 shares), the return on my trade comes in at 5.2% ($51 divided by $980).

That's not bad. In this example, we just captured more than an entire year's worth of income from Verizon in about 45 days -- while interest rates remain near record lows.

Now, keep in mind this trade is just an example. But my Income Multiplier subscribers and I have already earned income from Verizon multiple times in the past 24 months -- along with a host of other blue-chip companies like Starbucks, Intel and Microsoft.

Take a look at this table, which shows a sample of our trades:
 

Some of Our Recent Closed Trades
Stock Name Payment per 10 Contracts Days in Trade Return on Capital Annualized Return on Capital
Verizon Communications Inc. (VZ) $550 34 5.4% 58.3%
Microsoft Corp. (MSFT) $680 93 8.9% 35.1%
Whole Foods Market, Inc. (WFM) $800 94 11.4% 44.4%
Microsoft Corp. (MSFT) $1,030 93 12.9% 50.5%
Yum! Brands, Inc. (YUM) $1300 28 7.8% 101.5%
Intel Corp. (INTC) $800 107 12.9% 44.0%
Starbucks Corp. (SBUX) $1,140 62 7.3% 42.8%
JPMorgan Chase (JPM) $1,000 93 9.5% 37.4%
Phillips 66 (PSX) $1,460 77 10.8% 51.4%
Archer Daniels Midland Company (ADM) $800 56 8.8% 57.2%

This is the kind of power selling puts can have on a portfolio. And I want regular investors to be able to understand how they work -- so you can take advantage, too. If you've ever considered using options to multiply your income from safe, blue-chip stocks like the ones I've mentioned, then I urge you to check out my new special report.

Michael Vodicka 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.