“Unclaimed Dividends: 2-page form, collect $2,100” Jeff Clark

“If you complete and return the 2-page form sampled above, your broker could pay you $2,100 in less than 2 weeks. What’s even more incredible is that soon after you could receive an additional check for about $1,200.”

That’s the latest “free money” tease from the folks at Stansberry & Associates — leading us into a letter that promises income without having to buy a single share of stock (or bonds, or anything else like that). Could it possibly be real?

Well, the short answer is, “sort of” — as long as you don’t believe that it’s really completely “Free.”

And the long answer? Well, for that let’s peruse our clues:

Apparently, if you fill out this two-page form before June 12 and send it to your broker, you could get $2,100 on that date after you give your broker “two instructions.”

All you have to add to the form are “name, address, phone number, and a few other basic details.”

Of course, we all know what’s in the details … that’s right, the devil. Eeek!

The example of Smith Barney is used …

“Like all brokerage firms, Smith Barney accumulates millions of dollars through buying and selling stocks, trading options, and charging annual maintenance fees.

“But what you may not realize is that Smith Barney (like every other U.S. brokerage firm, whether online, discount or full service), is legally required to pass on a portion of this cash to anyone who wants it.

“For example, if you had filled out Smith Barney’s 2-page form at the beginning of last year, you could have since collected up to $6,500.
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“You see… each month, brokerage firms offer payouts to those who fill out a 2-page form requesting what I call ‘unclaimed dividends’.

“I call these payouts ‘unclaimed dividends’, because most investors don’t know about them and, as a result, the money usually sits unclaimed.

“Naturally, you won’t collect this money unless you ask for it. There isn’t a single brokerage firm in America who will offer it to you upfront.

“But if you take the time to fill out a simple 2-page form (which I’ll explain below), you’re entitled to receive as much as $2,100, effective immediately.”

What on earth are they talking about? Smith Barney is required to pass on a portion of their cash to us? Really?

Again, “sort of” … but not really. Let’s continue.

There are some more clues.

There is an “approval process” after you submit this form (meaning, the broker has to approve you for this “dividend.”)

We get a few quotes: Kiplinger’s apparently noted in this article that this kind of trading was the “province of professional traders.”

And some Minnesota farmer named Jim Bracklin apparently invests exclusively in this, according to Barron’s. No, I don’t know who he is, either.

So what else do we know about collecting “unclaimed dividends” — aside from the fact that Jeff Clark thinks this is the “single best income generating strategy in the world?”

There are a few more quotes that help to illuminate the issue …

“You fill out a little-known 2-page form that allows you to collect the money that other people – those who trade options – send to their brokerage firm. One of the best things about this opportunity is that you can collect these payouts whether the markets go up or down. It sounds a little complicated – and that’s another reason why 99% of the investment public has no idea this opportunity even exists.”

And, more usefully,

“… as author Lee Lowell states: Collecting ‘unclaimed dividends’, ‘is not a secret, arcane system that only a physics scholar will understand… it is a time-tested, legitimate strategy and is an incredible way to earn passive income… ‘

OK, so no surprise — this has something to do with options trading (the “no surprise” is because we’ve written quite a bit about Jeff Clark before, for his California Overnight Dividends, Transfer Dividends, etc., and apparently all of his strategies are options-based)

And how can you get other peoples’ options trading money without buying stock yourself, or buying call or put options?

There’s really only one way — selling call or put options. And since you don’t own the stock, this would be what is usually called “naked” selling of options.

Selling a naked call option, for example, would mean that you sell someone else the right to buy a particular stock at a particular price before a particular date. If you’re “naked” then you don’t actually own the stock, so if the person exercises that option you’ll have to buy the stock in order to sell it to them. For that reason, your broker will probably require you to have a portion of that amount of cash needed to purchase those shares in your account, in case.

I’m not sure that this is what Clark typically recommends — it could certainly be true that he recommends more complex trades like straddles or strangles or various animalistic options trading strategies like Condors or Butterflies to manage risk and boost returns. But he clearly is recommending an options trading strategy that does not involve actually owning the stock, which would be the more conservative (in my opinion) “covered” puts or calls.

So this is an advanced type of options trading — much different than what the typical individual investor might do, which generally falls into three … OK, four … categories:

  • Buying calls for leverage and speculation. This means buying the right to purchase a stock before a particular date at a particular price … you pay some premium over the current real value of the option (which is often zero), a premium that is usually called “time value.”
  • Selling covered calls (“covered” means you own the stock in question) for income — this is the flip side of the above. You own a stock and want more income than you can get from dividends, so you sell someone the right to buy your shares at a particular price before a set date … if the stock never gets to that price, you just pocket that premium payment. This is what the “California Overnight Dividend” was all about when that was teased last year. There’s even a covered call index Exchange Traded Note now, the BuyWrite ETN, which buys the S&P 500 and sells covered calls against it to boost performance, and there are several closed end funds that follow a similar strategy.
  • Buying puts to protect profits. If you have a big position with a large paper profit and don’t want to sell, you can spend some money to limit the downside if something catastrophic happens to the stock — just buy a put, which will give you the right to sell a stock at a set price before a set date, even if the shares have fallen below that point. People sometimes do this if they own too much of their company’s stock, for example, and are worried about what might happen if the shares collapse.
  • And, occasionally, selling puts as a way to reduce your cost basis in shares — if you know you want to buy shares of a stock and are willing to pay a particular price regardless of what the market price ends up being, you could sell puts on those shares and just have your cash sitting there to buy the shares if the option is exercised.

And to do this kind of more complicated, advanced, or sometimes riskier options trading requires approval from your broker, just like basic put and call buying — it’s just another level of approval. That’s what the two page form is for, though some brokers do it online. And that’s the reason for the “requirements” for the service:

“You see brokerage firms value long term relationships with their customers and in order to allow you to collect ‘unclaimed dividends’, your broker requires that you have a cash reserve on hand. This way they know that you’re a serious investor who isn’t just going to collect these payouts once or twice and then hit the road.

“You should also have at least 5 years of investing experience.

Remember: Jeff will only apply ADVANCED income strategies. They are very easy to use once you learn how, but they are definitely not intended for novices.”

They’re not actually even available for novices, unless you lie on the forms — brokers will require a certain number of years of experience trading stocks and options before providing approval for this kind of advanced options trading. And you will have to have a cash reserve — so you can say that you “don’t have to buy” any stock, but you do have to have the cash available to do so. Having that cash available to buy the shares if the put is exercised, for example, is what covers a “naked put” if you bet incorrectly.

And no, you’re not getting free money from your broker, and they’re not “required” to share their wealth with you — that’s just a greed-inducing smokescreen. They are required to give you any money that you make by trading profitably, of course, but that’s no surprise. This is just another kind of trading, one most brokers will allow you to do, but which most of them don’t particularly market or encourage (some do, and there are certainly plenty of brokers who particularly focus on options, but most of the older ones will still probably consider it a sideline).

If you’re interested in options trading, anywhere along the spectrum of strategies from risky to risk-averse, there are lots of useful places to go to read up on them — OptionPundit.net is run by one of our Irregulars and has some interesting articles about his (or her, I don’t know) strategies, and you can always go in to the Chicago Board Options Exchange site for the official stuff. CBOE gives a nice list of worksheets for most of the common options strategies here. If you request permission to trade options, at any level (buying calls, selling covered calls, selling puts, doing fancier flim flammery, etc.), your broker will require you to read (OK, at least pretend to read) the CBOE booklet, “Characteristics and Risks of Standard Options.” I’d suggest actually reading it.

Jeff Clark has been getting a lot of promotion from Stansberry for the last six months or so as a great options trader, and the claim is that performance for his services has been spectacular — this particular one is Advanced Income, but he also has a more-highflying and expensive newsletter called the Short Report.

I don’t know whether his record is genuinely as good as promised, but certainly it is possible to make a good income from options trading, and particularly from selling options (you’ll usually hear about selling options as an income strategy, and buying options as a speculative leveraging strategy), but you do need to understand that these are fairly advanced techniques that often require quick and/or active trading, and if you don’t understand them well you can easily get fleeced — either by an advisor who sells you a service that doesn’t work for you, or by failing to manage your risks in actual trading.

I can’t tell you whether or not to try any particular service, and there were no specific clues about his next trade in this ad so I don’t know what he’ll be recommending you buy or sell on June 12 … but I can tell you that you’ll be better off in any options trading service if you have a pretty good understanding of options trading, and perhaps even paper trade some options to see how they perform, before you send anyone else your money.

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30 Comments on "“Unclaimed Dividends: 2-page form, collect $2,100” Jeff Clark"

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DJ
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DJ
June 3, 2008 9:02 pm
I enjoy your site, I came to search for something else and came across this and thought I could shed some light on it for you. You’ve got it about 90% right, it’s likely though the “form” they’re talking about could be an options exercise form. I am a former options market maker, and this type of dividend arbitrage strategy is frequently employed, but usually just by market makers and other sophisticated traders. The day before a stock goes ex div. you might see thousands or even hundreds of thousands of the deep in the money calls trading. Why you… Read more »
Sandi
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June 4, 2008 6:15 am

Do you know about brokerage company in Europe which offer this kind of Unclaimed Dividends?
Thank you for your time and answer, Have a successful day, Sandi

Gravity Switch
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June 4, 2008 9:11 am

Thanks DJ — always nice to hear from someone who knows more than I do.

I really hope they’re not pushing the even-more-complex strategy you outlined for small retail investors, (I imagine their phone lines would be swamped with confused subscribers), but maybe they are — this makes selling naked puts, which itself is way outside the wheelhouse for most individual investors, seem pretty tame.

And a good point on the commissions — they can certainly add up, most options commissions include a “per contract” fee, sometimes .50 or $1, sometimes more or less, so pay attention.

Steve B
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June 4, 2008 9:24 am

Bloody good show S.G.

Jean E
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Jean E
June 4, 2008 9:41 am

Thank you for covering this. Those people at S&A keep filling my mailbox with tantalizing offers and it is great to have a source to help me sort through some of their claims.
Thanks again.

AtlantaExplorer
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AtlantaExplorer
June 4, 2008 9:49 am

Thanks so much for explaining this come-on! You saved me the $500 his “Advanced Income” newsletter would have cost. No one should offer any such schemes to small-$$ private investors.

Stan
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Stan
June 4, 2008 9:58 am
I am a fan of Jeff Clark. I subscribe to his advanced income report. It is based on buying stocks and writing covered calls and more recently he is teaching his subscribers about naked puts and their effectiveness. His theory runs like this (which is under sound principals)that if your willing to buy a stock at $12.50 and write a covered call against it wouldnt you be willing instead to sell to open a naked put. The net effet is this, If you can sell the put for $1.90 with a 12.50 strike your net cost for the trade is… Read more »
SageNot
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SageNot
June 4, 2008 10:07 am

I echo Travis here, DJ has that option strategy nailed. Jeff used to have a $99./yr service that must have been knee-capped, because he’s just doubled the annual cost of “The Short Report” to $4K/year. He’s on a roll & the Agora folks pump up outstanding results (Stansberry is part of Agora & Bill Bonner’s empire) like no other publisher.

*** Aside to Travis, you must’ve changed something here Travis, I can now login w/o any problems as before, Whew!

Gravity Switch
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June 4, 2008 10:13 am

Thanks Stan, that’s more what I was expecting to see out of him — not an unreasonable strategy, if you’re sure you’re right about those “beaten down” stocks most of the time, and definitely not as complicated as it could be, per DJ’s example. Naked puts is more what I expected from Clark, thanks for the confirmation and details.

Penny Spender
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Penny Spender
June 4, 2008 12:29 pm

Thanks DJ and Stan for shedding some light on this. I’d wondered for a while about the possibility of such an arbitrage trade… now I know what it’s called. SG rocks 🙂

DJ
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DJ
June 4, 2008 2:38 pm
From Stan’s post “It is based on buying stocks and writing covered calls and more recently he is teaching his subscribers about naked puts and their effectiveness.” Clark is right on covered calls vs. short puts (however I’d discourage retail traders from trading “naked” puts but instead “cash secured puts” People often look at you like you’re crazy when you say this, mainly because they don’t have the fundamental understanding of options that they should have but doing a buy write is the exact same equivalent position to selling puts (cash secured puts if you want to be specific) In… Read more »
rich roddy
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June 4, 2008 9:48 pm

i subscribed to the short report for a year. as with most newsletters i have taken, i put the kiss of death on jeff for that year. i am sure he was the champ the year before and the year after. the only newsletters i have ever found profitable are from the Oxford Club and Mt. Vernon Research

OptionPundit
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June 5, 2008 3:25 am
Travis, thanks for the great post. As usual, you walk an extra mile to provide as much information as possible to your readers. It’s a fantastic place and saves big sum to any newbie. I have your site in my very select list of blogrolls. Thanks for mentioning OptionPundit. I appreciate it. Option Trading is not difficult once one understands the two concepts 1) Power of Compounding. Those who understand they get it, those do not, they give it, and 2) Understanding how a business is run. Let me combine the two- Compounding: Once one has understood the power of… Read more »
SageNot
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SageNot
June 5, 2008 8:37 am

You had a bad year with Jeff Clark Roddy? I know about the Kiss of Death syndrome, but Jeff’s track record, going back dozens of years, is quite profitable.

A very reasonably priced advisory is OI, they are in the Top 3 for quite a few years now. Yes, they do stress commodity-type stocks mostly, but that’s where the action has been over these past 1/2 dozen years or more. For $49.95/yr I’d rate them right up there with the best market letters around.

Bob Schlesinger
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Bob Schlesinger
June 5, 2008 2:17 pm
I, too, subscribed to the Short Report for about a year in 2006. I would say that it did poorly. I wasn’t alone. You should have read the subscriber comments in their forum at that time! Maybe’s he’s had a good streak recently. Now Stansberry is selling it for $2000 a year and plans to raise it to $4000 in about a week. However, I wouldn’t pay $400 for it. One of the problems with a popular options trading service is that a whole bunch of people try to jump into the market at the same time – and beginners… Read more »
Gravity Switch
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June 5, 2008 10:58 pm
Thanks for the comments, folks. Bob, that is indeed the rub with all options services — once you get away from some of the really popular stocks and indexes, and the most heavily traded contracts for those, the volume can be teensy and the bid/ask spreads huge. Having even a hundred people all trying to plunk down a few thousand dollars on the same day can really drastically move the price … and if that number grows to a few thousand subscribers or more, the newsletter is going to be extremely limited in what they can recommend … or else… Read more »
Tobey
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June 11, 2008 9:44 am

where is the form. I looked for it and didn’t find it.

Gravity Switch
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June 11, 2008 9:57 am

Tobey, the form is simply an options trading approval form from your broker — if you want to trade options, you need to request approval to do so (unless you already have it). As I hope the above article makes clear, there is not really a form that you can fill out to get free money, it’s just a type of trading you can do.

Options Trader
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August 12, 2008 12:47 am
Interesting discussions here regarding options strategies. Trading options is nothing but pure business and with the same amount of discipline and attention to details as a normal gig fixing brakes on cars or operating heavy machinery. One mistake and it could end your profitable journey into the wall and your hands bloodied. Using options for consistent monthly income is the best usage of the options strategies. Many professional companies have been doing them for decades. Having spent time at the desk of an institutional trader, was a sobering experience. They never tried to hit home runs, just a small bit… Read more »
farley 5
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farley 5
August 12, 2008 8:45 am

Yeah, Naked Puts work really well in a Bear Market. September and October are tough times in the market. I would not want to be in ANY naked puts right now. Bear Spreads for the Oil and Oil Service possibly.

Options Trader
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August 12, 2008 4:52 pm

Naked puts only in bull markets only and under certain technical conditions.

Make no mistake it not fun to get assigned and clobbered in your account with stocks that keep going down taking your bankroll with you. Been there done that on PCU, FCX, BIDU..

Ben
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Ben
February 10, 2010 10:00 pm

I subscribed to Jeff’s Short Report at the end of October 2009 and he has given me a perfect track record. Keyword being “me”. He may not have a perfect track record because he is doing what so many traders do and staying in trades way too long. I average about 15-25% a week with Jeff’s trades putting about 5k into each. There is real money to be made with the short report, but you just have to be able to watch it during the day to know when to get out.

Robert
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Robert
February 11, 2010 1:41 am
I became a subscriber of Stansberry and Associates’ Alliance a little over a year ago and have had very gratifying results with Jeff Clark’s Short Report in combination with his Direct Line feature in which he maintains a daily blog of his thoughts and proposed actions based on technical aspects as he sees them. The service is pricey at $5,000 for a lifetime subscription plus $200 annual fee (and that includes all of the Stansberry publications, of which there are several, except Phase 1 Investor) but over the time I’ve been a subscriber I’ve had more winners than losers and… Read more »
pat
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July 15, 2011 10:49 am

is there someone with special credentials i should contact for these forms ?

denny
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denny
June 1, 2012 11:40 am
I subscribe to Jeff Clark’s service and am very satisfied with it. Selling naked puts is a very conservative strategy if done properly- selling them only on very profitable, dividend-paying stocks who have tons of cash. You sell at a strike at which you would be happy to buy the stock . Most of the time the put will expire worthless, you have collected the premium, and you can do it again. If assigned, you are happy to buy the stock at that price and you can sell covered calls, or just hold and collect dividends. Examples of such stocks… Read more »
Grant
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Grant
July 24, 2008 7:57 pm
Remember back to your very first trading days, that is where I’m at right now. Seeing everything online is really intimidating to me. I understand you guys can’t tell me, but what would you say would be a good place to start, just to get my feet wet. With the internet its hard to know whats a scam or whats over my head with limited funds, or whats over my head techincally all together. I was so close to signing up for the http://www.marketfn.com success trading group. Is it a good service? And as far as Brokers, Scottrade, Etrade??? Thanks… Read more »
Rich
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Rich
July 25, 2008 5:19 pm

Having worked for a leading investment firm from 1976 can tell you many many people lost their shirts shorting naked options. Some almost put firms out of business with margin calls unmet. People typically get most confident/greedy just before the market turn that takes them to the cleaners. And that’s the way it is.

farley 5
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farley 5
August 12, 2008 6:42 pm

Thanks for the clarification. I sell naked puts in established bull markets. Don’t quite remember the last bull market ….

Jim
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Jim
August 25, 2008 8:36 am

Are you saying that individual investors could not make money because of commissions on the option ??

Pat
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Pat
October 25, 2008 5:17 am

Stan,

I’m currently investigating whether or not to sign up for JC’s service. In the trade you used as an example, what is the maximum exposure I would have … in other words, how much could I lose? Let’s say I wanted to put $5,000 into the trade … ie I’d sell puts for that amount.

thanks

Pat

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