“‘Hack’ the Stock Market” With Your 18-Digit Code!

By Travis Johnson, Stock Gumshoe, December 14, 2010

Dr. David Eifrig is one of the Stansberry writer/editors, and for a couple of years now he has put out the Retirement Millionaire newsletter that seems to be largely focused on ways to get special perqs and discounts as a retireee … as well as a bit of financial commentary and ideas, I’m told (I haven’t seen the letter).

But he’s also a former Wall Street guy, and a while back he launched one of the “upgrade” newsletters that publishers love so much: Retirement Trader, which is far more expensive than the “entry level” cost of Retirement Millionaire (the latter has mostly been sold for $49 or $99, the former is priced at $2,500 and currently “discounted” to $1,500). This letter apparently takes advantage of Eifrig’s trading expertise from his days at any number of big investment banks to give specific trade recommendations.

And one of those recommendations (this strategy seems to be the primary focus of the newsletter, though it’s a little hard to tell), is to “hack” the stock market by using a special 18-digit code and “unlock your brokerage account for instant cash.”

So what is it? This is how he describes it in the early stages of the long ad letter:

“In a nutshell… if you have a computer at home, there’s a very clever way for you to ‘hack’ Wall Street trading platforms. This enables you to sidestep buying conventional stocks… and pocket cash in just a few minutes.

“Implementing this ‘hack’ simply entails entering a short piece of computer ‘code’ into the system of an online brokerage account… and thus receiving IMMEDIATE cash. (It usually takes anywhere from 30 seconds to 3 minutes.)

“The best part is, you don’t have to know anything about computers or programming code to do this.

“That’s because I’ll show you how to use a piece of already–written ‘code’… All you have to do is cut and paste it into a brokerage firm’s website.”

Sounds kind of like what we’ve heard from other folks in the past, doesn’t it? Apparently it’s kind of tricky:

“You will need an online brokerage account to do this. But not all accounts work with this ‘hacking’ code.

“So if you already have an account, you may have to request that your brokerage ‘unlock’ a certain feature which will enable you to do this. Or you may have to find a different brokerage firm altogether. “

And then this …

“I don’t want to get too technical here, but the point is, some people place orders for crazy investments they hope will make them a fortune. They put money into the system like a gambler going for the jackpot… When in fact, the trade doesn’t work most of the time.

“Instead, their dreams expire worthless. And the money they used for their gamble… never to be seen by them again. But I’ve found a way to ‘hack’ around the system and grab that money for ourselves. “

So yes, you’re probably getting the idea about what this is — and you’re right, it is a kind of options trading (the good Dr. is even good enough to use the word “options” in the ad a few times, so we can’t claim that he’s completely obfuscating the issue, though he doesn’t actually say what kind of options trading he recommends).

And he describes the risks:

“The good news is, when you follow my ‘hacking’ instructions EXACTLY… you’ll end up with one of two possible scenarios:
In the first scenario, you’ll get to keep the money, and spend it any way you like… and that’s the end of our ‘hack.’

“In the second scenario, you still get to keep the money… but you’ll also be required to buy the underlying stock. I’ll tell you more about this risk later. Because of the possibility of having to own the stock, we only do this ‘hack’ around solid stocks… to keep the risk to a minimum. And you’ll know the risk involved for each play at the start so there will be no surprises.)”

So … if you’re already a reasonably savvy investor and options trader you probably now know what this is: He’s recommending selling puts options. That is, you use either your margin account or a backstop of cash as your collateral, and you sell to someone the right to sell to you a stock at a certain price before a specific expiration date.

Even if you haven’t done options trading you probably know what a call option is — that’s an option to buy shares at a set price before a set expiration date (ie, an AAPL March $350 call option gives you the right to buy 100 shares of Apple for $350 per share before the options expiration date in March — and in exchange for that, right now you’d have to pay something in the neighborhood of $9.50 per share (so $950 per contract, since the contracts almost always cover a round lot of 100 shares). Incidentally, call options have 18 digit codes, too — that one happens to be AAPL110319C00350000, you can probably figure it out yourself but buried not-so-deep in that “code” are the stock ticker, the expiration date, the type of option, and the strike price.

Well, a put option is just the opposite (well, not really the opposite — the opposite would be the person who sold you that call option — but conceptually, we’ll call it the opposite). The put option gives you the right to sell the shares instead of to buy them, so people usually buy put options either as a bet that a stock will go down, or as a hedge against their position (ie, they own 1,000 shares of Apple and they’re nervous as hell that the stock might tank, but they don’t want to sell … so they buy some put options to protect themselves a bit in case the shares do collapse.

And I’ll use the same example — let’s say you want to make sure that you can sell Apple for close to today’s price of $320 to protect your profits … let’s say we’re a little cautious and we’ll round down to $300. You can buy the right to sell AAPL shares at $300 anytime between now and late March for about $11 per share (again, you can only do this with options contracts that represent 100 shares, so you’d pay $1,100 per contract). That contract is worth nothing if Apple stays above $300, because as long as the market keeps the price higher you’d be crazy to sell it for less than the market price … but if Apple falls to $250 for whatever reason, that put option quickly gets to be worth about $50 (you could theoretically buy shares for $250, then exercise your put option and sell them to someone for $300 … though in practice you’d probably just sell the put contract to close it for roughly the same profit, which is far simpler).

So that’s what a put option is — and whether you buy a put option or a call option you’re speculating that the stock will move in your direction, with the likelihood of that happening (as interpreted by the market) being the primary driver of how much that option costs. Most of the time speculators and traders do this with “out of the money” options — like either of those Apple options above, meaning contracts that are valued purely on “time value” or “premium,” they wouldn’t be worth anything if you had to exercise the contract today. Like the Apple put option above, the right to sell AAPL for $300 today is worth nothing (or almost nothing, the same put option with an expiration in three days is selling for about ten cents), but the right to sell it anytime between now and March is worth, sez the market, $11 a share — that $11 can be called the time value or the premium for that option, and it naturally erodes over time unless the stock is moving quickly in the right direction (you’d pay a couple dollars less for the same put option expiring in February, just because you have less time to be “right,” and there is no way to stop the calendar from moving inexorably forward).

So that’s where Dr. Eifrig’s strategy comes in — it’s clear from his teasing commentary that he wants to bet against these speculators who are making wild and unlikely bets (most options expire worthless) … which means he would take the other side and sell you your put option. That’s what he means by the line that in one of the scenarios “you still get to keep the money… but you’ll also be required to buy the underlying stock.”

So if instead of buying those AAPL options, you could sell the AAPL put option contract for March (again, this is just an example — Eifrig says that he does this only with “solid stocks” but doesn’t hint as to which ones he’s trading right now), and you would get to pocket that $1,100 per contract. If the stock stays above $300 for three months or so, the option expires worthless, as most of them reportedly do, and you just pocket the money. If it drops to $250 and someone exercises the contract on the other end (it will be automatically exercised by most brokers right before expiration if it’s “in the money”, though it could be exercised earlier at the buyers option), you have to then spend $30,000 to buy 100 shares of AAPL for each contract (or put up $5,000+ to buy back the option and close the contract.

So that’s the big obligation that backstops the $1,100 you got in “free” cash — which means, you’ll be unsurprised to hear, that if you want to sell that option contract you’ll have to have enough liquidity in your account to make your broker comfortable with you holding this obligation (ie, enough cash or margin to actually buy 100 shares of AAPL at $300 for each contract you sell) — different brokers use different calculations to determine how much actual cash you have to have available and “locked up” against that contract, it might be half or a quarter of the total, for example, depending on your approval level and your margin account and your broker’s policies, or if you’re restricted to using cash-secured puts you’d have to have the full amount in cash (so for this expensive stock, that’s $300 X 100, or $30,000 in cash to back up each contract). Still, tying up $30,000 in cash for three months and earning $1,100 for doing so is a pretty strong annualized income stream — if you do something similar over and over that’s $4,000 a year, so income of well over 10% on your money. Of course, the risk is that if you wake up one morning and AAPL shares have fallen 30% overnight because Steve Jobs was seen naked dancing in a fountain with Bill Gates, you wipe out four years of these kinds of modest returns in an instant.

That’s an exaggeration of the life of a put seller, of course — much of the time you might be making closer-in bets, or bets that are further “out of the money”, and you’d hope to have enough capital that you can do this with some diversification and let the odds work for you … and choose the stocks that are almost surely not going to collapse overnight. Of course, if you sell puts against stocks that have low volatility your earnings would also be lower, but most stocks aren’t nearly as expensive (in terms of just the share price) as AAPL so you wouldn’t necessarily be exposing such a big sum to just one contract. There are also other ways to limit your risks, though doing so always cuts down on your income a bit — you could, for example, buy a $280 put option at the same time that you’re selling the $300 one … you’d cut your income in half, but you’d also put a fairly tight limit on the amount of loss you could potentially take.

It’s often said that the “smart money” are the options sellers, since they know that the odds are with them and they can just harvest the time value from options contracts over and over … but that “smart money” also tends to be institutional investor money, and they have massive accounts and a far easier time being very diversified and rolling with it if they turn out to be wrong. There are several advisory services and newsletters that offer similar strategies to this, with the most widely advertised probably being Lee Lowell’s Instant Money Trader — though lots of folks also use the more familiar and comfortable but conceptually similar covered call options selling strategy (meaning instead of holding cash or margin and selling puts to give someone the right to sell to you, you hold the stock and sell calls against it to give someone the right to buy from you).

And it’s true, if you’re an active trader you can probably generate far more consistent returns by selling options than by buying them, just make sure you research the strategy well and understand what you’re doing, and what your risk exposure is for any particular trade.

I don’t sell options myself, and I can’t tell you which stocks to try it on — I know that a lot of my readers sell covered calls, and probably a great many of you are far more accomplished options traders than I am, so feel free to chime in with a comment below if you have particular strategies or ideas that you find valuable (or, of course, if I made a mistake above … though people rarely need encouragement to point those out!)

If you’re completely new to this and haven’t traded options before, your broker will ask you to fill out a form and sign it to apply for the right to trade options in your account (even if you can buy options now, you may need a higher level of clearance to sell options), and they should send you the standard options book from the CBOE … by all means read it even though you probably won’t want to, then do your research, be careful, and enjoy!

Related Gumshoe Articles

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64 Comments on "“‘Hack’ the Stock Market” With Your 18-Digit Code!"

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PETER
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PETER
December 14, 2010 4:42 pm

I USE THIS STRATEGY EVERY SINGLE MONTH TO BOTH GENERATE INCOME AND ATTEMPT TO BUY STOCKS I WOULD LIKE TO OWN AT A CHEAPER PRICE. I ONLY DO THIS ON STOCKS I WANT TO OWN ….SUCH AS SVW, SLW , GG , CCJ , COP, XOM (SEE A PATTERN THERE?..LOL). I SELL COVERED CALLS TOO AND JUST ADJUST THE POSITION SIZE IF IF THE STOCK MOVES TOO MUCH ONE WAY OR THE OTHER. SO FAR SO GOOD USING THIS STRATEGY.

Swissguy
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Swissguy
December 14, 2010 5:23 pm

Just a few comments; you only need 30k not 300k to settle an APPLE $300 PUT contract.
Maybe I am just a stickler but your 18 digit code illustration ( AAPL110319C00350000 ) has 19! In a more productive vein, I have actually generated thousands selling APPLE puts all year long! Try it, you will like it!

jims
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jims
December 14, 2010 6:33 pm

I understand the opportunities and risks of options trading but how does the "secret 18 digit code" help you. Can you pick a specific option to sell that is so far out of the money that there is little chance of exercising the option? When you buy or sell an option the broker generates the 18 digit code.

NormanG
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NormanG
December 15, 2010 4:13 am

I trade stocks though 0 experience with options. I would like to learn. Please share with me any suggestions regarding good books, seminars, web sites etc.
Thanks!

TheBigM
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TheBigM
December 15, 2010 5:17 am

How do they come up with "hacking" the stock market? Sheesh!

Burky
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Burky
September 9, 2012 8:45 am
As is always the case, these things are not as good underneath as the glitter on the surface! I WAS a subscriber to this Stansbury service and lost almost $60K over several years by faithfully following their advice, using tight stops and daily monitoring. Never quite figured out how the majority of my investments could do so badly though! Much of what they recommended either went bankrupt, or experienced stock crashes overnight, making Stop Orders worthless. I found their recommendations to be extraordinarily poor overall. Lost my shirt with the good Doctor’s Put opportunity on PUDA Coal, which crashed overnight… Read more »
Scott O
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Scott O
July 21, 2013 8:43 pm

I don’t see PUDA in either Retirement Millionaire newsletter or Retirement Trader advisories at the time of its precipitous dropoffs in 2011. It’s a small Chinese coal company, nothing like the blue chips Eifrig typically recommends. Exactly when and in which vehicle did Eifrig recommend it?

Byron
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Byron
September 3, 2014 1:55 pm

Never buy Chinese or foreign stocks. They tend to shaft you. Take your money and leave you empty handed.

Ron
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Ron
December 15, 2010 9:15 am

I trade options on a regular basis. Just a word of warning, NEVER sell uncovered calls. The theoretical losses are limitless. As far as selling puts, it is the bulk of my trading.

JaJo
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JaJo
December 15, 2010 11:10 am
I sell naked puts for years. To filter my selection I subscribe to an option service where I can set up my filters. (Costs me $60/month, not cheap but I make much more.) I sell 4-6 weeks out puts (short term), when the stock is either in an uptrend and corrected or just reversed from a downtrend. I sell puts at least 15-25% out of money, with premium 1-3% of the stock price. And never for a stock that has an earning announcement during the life of the option! I monitor my positions. I don't protect it but occasionally –very… Read more »
Byron
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Byron
September 3, 2014 1:58 pm

Jajo, Thanks for sound advice. I always like to get a different perspective.

robert cassa
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robert cassa
January 4, 2015 8:06 pm

Sir,
I know its been a while since this comment but what service do you use for selling puts.My thanks.Bob Cassa

D.M. Ryan
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D.M. Ryan
December 15, 2010 12:52 pm

I don't mean to be back-seat-driver'y, but Dr. Efrig is pushing the selling of both kinds of options. Senario 1 talks about put options, while Scenario 2 talks about call options.

The giveaway for scenario 2 is, " In the second scenario, you still get to keep the money… but you’ll also be required to buy the underlying stock. I’ll tell you more about this risk later." The "risk" is the stock being called away after it's rallied above the strike price.

I have to say I'm enjoying the sleuthing – thanks for the service.

T1 Broker
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December 15, 2010 3:42 pm

I'm looking for book recommendations that teaches this "selling puts" strategy. I've looked at the book offerings at Amazon, but don't know which ones to buy that have real strategies that actually work in making money. Suggestions are welcomed.

August
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August
December 15, 2010 7:50 pm

Dear Gumshoe, what an empty advice this time

ET69
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ET69
December 15, 2010 10:36 pm

Has it ever occurred to anyone that options ought to be outright illegal? It all reminds me of the old Abbot and Costello routine: "Whose on First".!

Joe
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Joe
December 18, 2010 10:59 pm

Look up “The 36% Solution”… at least I think that’s the percentage in the title. It’s a good book on the basics, but I found I had to tweak it a little.

Therefore I don’t do it monthly, and only by selling options in the opposite direction of the primary trend when the odds are 97% in my favor. This means you need to learn some technical analysis as well….. and get good at it. It’s not for everyone, but you can do this as a business and make good money starting small and then building up from there

OptionPost
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OptionPost
December 19, 2010 6:27 pm
I have subscribed to the Retirement Trader newsletter for a few months on a trial basis, and have just cancelled it (cancellation fee was 10% of the subscription) because I know enough about selling naked puts (and covered calls) myself, and don't need to pay $1500/year just for the reminder… This newsletter was supposed to teach us, old dogs, some new tricks, but in reality it only offers put selling recommendations (aka "bucket system" in the teaser that got me). A few additional notes and observations about selling puts (or selling covered calls): 1. The best scenario is when the… Read more »
SQV
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SQV
January 18, 2012 12:59 pm

Where or what is the best way to learn about this? Is the newletter a good place to start for a novice?
Thanks

Stansberry CS
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Stansberry CS
February 14, 2012 9:48 am

If you have any questions about Stansberry and Associates, please do not hesitate to call customer service at 1-888-261-2693. We would be happy to assist you. We are open Monday – Friday 9-5 EST.
Or email at info@stansberrycustomerservice.com

Jake
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Jake
January 2, 2011 11:22 am

Hey, I'm an internet marketer and I'd be very happy to work with any of you having provable success with your own systems to create a product that explains your system to newbies. Contact me at worldwidepants@comcast.net

Jay
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January 2, 2011 7:45 pm

great info; really appreciate it

HGE
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HGE
January 8, 2011 3:50 am

Hi all, I'm totally new to this trading world and I'm fascinated so far and very nervous to say the least. Does anyone care to comment on how much they are making per year consistently doing this full-time? Thanks !

Robert
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Robert
January 18, 2012 6:02 pm

HGE, If you open an account with TDAmeritrade ( https://www.tdameritrade.com )
(you don’t need any actual money) and sign up for there “Thinkorswim” program. If you then open it as a “paper” trader they give you $300,000 of play money to trade stocks, options or forex.
For play money the stock ticxker has a 15 min delay, for real trades it is real time.
Robert

RBM
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RBM
January 11, 2011 6:51 pm
What I am not understanding is that their promo states, that 'Sometimes the "code" works for only a few hours. Other times you can use it for a day or two." I would also like to say that Stansberry (they publish the subject service here) is part of Agora Publishing. http://www.Agora- Inc.com publishes all sorts of "advisories" and, in total, they tell you what you want to hear. Stansberry says the world is going in the toilet, and another of their writers will tell you things are peaches and cream. When I first saw this, I did not know that… Read more »
Phil Hoff
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Phil Hoff
October 29, 2011 3:41 pm

RBM said, in reference to Stansberry “I doubt that you will ever see a performance record for any of their publications”. Au contraire. They publish the record of all of their investment advisories every February.

mycha
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mycha
January 14, 2011 2:20 pm
COULD SOMEBODY EXPLAIN THESE, PLZ? JaJo wrote 4 weeks ago: "I monitor my positions. I don't protect it but occasionally –very rarely, maybe 1-3% of the time– I buy back with a loss. Also occasionally, when I am lucky, the stock moves up quickly. In such cases I sell out-of-money calls as well. More income without more margin requirement! " I am quite new to options trading. I think I understand the basic concepts, but not the specificities. Could somebody explain me what does "buyback" mean and how it can be carried out? Can you buy back and close the… Read more »
Gene
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Gene
August 25, 2011 3:54 pm
I sell both calls and puts. The best way to buy a stock you want at a price you have determined is reasonable is to sell a put. 45 days out is the best time to do this and if you are put the stock (you have to buy it) then you can turn around and sell a call. This type of trading is only for a portion of your portfolio that you feel safe enough to place at risk as nothing in life is fool-proof. By using low risk stocks that are in a trading range, ie. MSFT, you… Read more »
Stansberry CS
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Stansberry CS
February 10, 2012 9:38 am

If you have any questions about Stansberry and Associates, please do not hesitate to call customer service at 1-888-261-2693. We would be happy to assist you. We are open Monday – Friday 9-5 EST.

HedgeYBet
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HedgeYBet
March 5, 2012 10:59 am

I am a subscriber to a few of Stansberrys news letters and found them all so far to be completely crediable,,maybe the most crediable and helpful and knowledgeable I have seen. I find Doc’s advice better than most others I have accross…i donot think you would be dissappointed with Retirement trader…just follow along a few of his recommendations and see for yourself…most others cannot say that…and Stansberry does give a full accounting of their recommendations with results every year.

David Heath
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David Heath
July 24, 2012 12:14 pm

Hey all, I have learned a lot, thanks

mary ann razzi
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mary ann razzi
September 15, 2012 3:41 pm

I deal with Lindsy Fuller in Moorestown NJ. I would like to know if I should sell some of my shares of Exlon I have had for 40 years. Do you see this Exlon moving up in months to come.

lisa
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lisa
September 17, 2012 7:26 pm

Wait, I still don’t get how you “hack” with the 18 digit code and how you get paid in 60 seconds. I already sell protected puts. But I don’t see how this “system” is different. Even if you sell puts and money is put into your account it isn’t money until you buy back contracts or the option expires.

revdale
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revdale
September 27, 2012 4:50 pm
I have a flex trade account with Stansbery. This means I can control 5 of there news letters at any one time. I can trade off for others at any time. I also get any new items as thay might become available. This cost 5000 for life but its much cheaper then several thousand each per year. There is a 200 per year maint. fee. I have found them to be totaly honorable and trust wearthy. Dont forget you are dealing with risk products for the most part and risk means some times you LOOSE. I made over 6000 with… Read more »
spellchecker
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spellchecker
July 25, 2015 1:57 pm

You can’t spell “worthy” or “lose”.

larry
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larry
October 17, 2012 3:07 pm

I’m a subscriber to instant money trader lee lowell’s put selling program chk it out

jnksak
Irregular
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November 26, 2012 9:17 pm

Does anyone know where you can get a discounted subscription to Retirement Trader. They offered it to me for $2500 which seems really expensive. Where can you see if he really makes money month after month?

Option Seller
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Option Seller
June 14, 2013 12:08 pm

Yes, this is a legitimate strategy, however, like you say it is risky. I think credit spreads are a better way to go as your risk is limited. But, if you have the capital to purchase the stock if you get assigned, it’s an ok way to go. You could also use diagonals or calendars on low volatility stocks with long dated back options. You could keep rolling out the shorts to collect premium.

Mark K
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September 12, 2013 8:57 am
I’m an artist and sit in my studio for 12 hours a day and get to research and invest all the while I’m painting. I’ve been investing for 25 years with very little money, and have never seen my money grow like everyone says it will … 12% per year for example. I’ve always tried to catch the big ones, or the falling knives, or to time it right with charts. Nothing has worked. I’ve been close to throwing in the towel 100 times, have cried, have been determined, have felt cheated, felt like someone up there is toying with… Read more »
Glenn Edgar
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July 26, 2015 5:49 pm
“Make Options Illegal” LOL They perform very useful hedging functions for speculators to protect profits. Speculators provide liquidity, and the concept is NOT very complicated. BEWARE! Strategies like selling puts are apt to be “make a little almost all the time, but occasionally lose a lot” strategies. Buying out of the money options can be the exact opposite — “lose a little money most of the time, occasionally make a lot”. It’s the not ONLY (which you should at least try and figure out — not easy) the expected value, which includes the “lose a lot, with the make a… Read more »
Gravity Switch
Admin
11
December 14, 2010 5:29 pm

Ooops! Sorry for the typo, will fix. And you're right, I didn't count the digits — not sure if they're variable based on stock price but I thought they were all at 18 … mebbe not. I just used them as an example, but this would have been a great year for selling Apple puts (nothing beats selling puts on a stock that only goes up), congrats!

Ron
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Ron
December 15, 2010 9:11 am

The variation is a function of the stock symbol. [stock][6digit date][P or C 1digit][price to the half cent 8digit]. Add all that up and you get symbol plus 15 digits.

Gravity Switch
Admin
11
December 15, 2010 9:16 am

Oops, right you are — thanks for the clarification. So yes, you can have shorter options symbols, too, for one or two-letter tickers, the 18 is for the "average" three letter ticker symbol.

Gravity Switch
Admin
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December 15, 2010 9:21 am
jims, no — the code is the ticker symbol for a particular option contract, it would be the same for anyone buying or selling that same option type (put or call), strike price and expiration for that particular stock. The "secret" doesn't help you, except that if you join an options newsletter they'll give you specific options tickers that they recommend. And yes, you can pick far out-of-the-money options for next month to give yourself a huge probability that it will never be exercised, but it's a market — so those options are far less valuable and will generate far… Read more »
Gravity Switch
Admin
11
December 15, 2010 9:22 am

I always suggest that folks start out with the CBOE — they have some good free online tutorials at http://www.cboe.com/LearnCenter/Tutorials.aspx

Spencer
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Spencer
December 16, 2010 8:55 pm

I highly recommend the book "The Rookie's Guide to Options" by Mark Wolfinger. He covers conservative ways to use options.

jims
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jims
December 15, 2010 11:04 am

Thanks for the input. So the "secret" is just a come on to get you to subscribe to an expensive newsletter for their recommendations on the options to buy/sell. By the way, I do subscribe to 2 of S&A more resaonably priced newsletters and hve been very happy with the results.

Gravity Switch
Admin
11
December 15, 2010 1:39 pm

Thanks — but though I don't know what he actually recommends in the letter, this sounds like just puts to me. If you sell a put option, you're required to buy the stock if it's exercised. The risk in selling a call, in part, is having to sell the stock at a below-market price, not buy it at an above market price as with put selling (though I suppose if you're selling a naked call option, you'd have to buy it and then sell it).

D.M. Ryan
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D.M. Ryan
December 15, 2010 2:03 pm

It's your "call", of course, but I interpreted Scenario 2 as requiring to have the stock on hand beforehand so as to write a covered call. Since I'm not going to plunk down a $1500 entrance fee, I'll have to leave it as my own take on the teaser.

Again, thanks.

OptionPost
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OptionPost
December 19, 2010 5:51 pm

There is a book dedicated to this strategy, titled: "Covered Calls, Naked Puts". These two strategies are in fact, equivalent to each other… But if you want to learn more about options, the best book is "Options as a Strategic Investment" by Lawrence McMillan.

Jim
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Jim
December 21, 2010 1:17 pm

Actually, it's either one. In an IRA account, you CAN'T write naked puts, so one would use a covered call strategy there. In a trading account, you would write naked puts. The risk/reward is similar

MS_EVIL_TWIN
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MS_EVIL_TWIN
December 27, 2010 6:41 am

Which two? Do you find S&A credible with integrity?

DDMy
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DDMy
December 28, 2010 2:45 pm

What option service do you subscribe to for $60. a month. I am looking for a good one. I found your comments to be helpful.

mycha
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mycha
January 14, 2011 2:12 pm
I monitor my positions. I don't protect it but occasionally –very rarely, maybe 1-3% of the time– I buy back with a loss. Also occasionally, when I am lucky, the stock moves up quickly. In such cases I sell out-of-money calls as well. More income without more margin requirement! Hi! I am quite new to options trading. I think I understand the basic concepts, but not the specificities. Could you (or somebody else) explain me what does "buyback" mean and how it can be carried out? Can you buy back and close the position with a slight loss at anytime… Read more »
John
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John
December 29, 2010 11:58 am
I can write naked puts in my IRA. I just have to have enough cash to be able to buy the stock at the strike price. It "ties up" the money, so I can't buy something else with it. Gumshoe is right, it is puts and the risk is having to buy the stock if your put is assigned. If it were naked calls, the risk would be having to sell the stock (that you don't own, else it would be covered, not naked). For a put, the risk is limited to the strike price, as the market price can't… Read more »
LaraB
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LaraB
January 15, 2011 5:22 am

Of course it should NOT be illegal, even if its considered outgrageous by some. No one is forcing anyone to participate. Like most things in life, it's an "enter at your own risk" adventure, but at least on this path there are considerable bold neon-like signs stating the risks.

LaraB
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LaraB
January 15, 2011 5:39 am

Since you actually received the newsletter, would you explain what he means by "…sometimes the "code" works for only a few hours. Other times you can use it for a day or two"? Is he recommending selling puts on, or shortly before, the expiration date? If so, wouldn't they be near worthless already?

turtlej
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turtlej
January 17, 2011 10:32 pm
mycha: I've been trading options for ~ 7 years. Every year I say it's not worth all the effort, but still doing it. Latest few years doing distant diagonals, which are like covered calls, except using a long dated call option instead of stock. I have done short puts…. To initiate the naked put, you sell the put, so "buyback" is buying the same put (strike price and month) before it expires. Yes, this closes your position. If you sold a naked put for, say, $0.75 credit and the stock took off so that your put is now only worth… Read more »
turtlej
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turtlej
January 17, 2011 10:32 pm
To protect a naked put, you would buy another put for the same expiration month at a lower strike price. This limits your loss. Say you sold a $50 strike put for March. To protect, you could buy a $45 put. The $50 put will be worth more than the lower strike put (at a particular moment in time), so you will still receive a credit (less commissions) One would do this as a risk adverse measure to limit potential loss. In this example the most you could lose is $500 less credit received and plus commissions.
mycha
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mycha
January 18, 2011 4:32 pm

thank you for your answers

TimC
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TimC
February 10, 2011 9:53 pm
Thanks to you and all others here for your commentary. This is a great service (Stock Gumshoe). I was tempted to buy the news letter ($2500) and thought here we go again to my self at the end of the video when I saw the cost. Ive finnally realized that they are all just marketing pieces to sell you something when, all you have to do is google some of the terms thier using in their video or letter (which led me to this article and commentary on Gumshoe) and your able to find out in more detail what these… Read more »
jmac37
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jmac37
February 19, 2011 4:02 pm
You say, "I've been trading options for ~ 7 years. Every year I say it's not worth all the effort, but still doing it." I've dabbled in options for quite a while myself, but haven't really gotten serious about educating myself in the strategies, techniques, etc. Interesting that you say "…it's not worth it, but still doing it." Can you elaborate? You seem pretty knowledgeable, so I'm assuming you have, in fact, taken the time and made the commitment to self-educate (which I admit, I, for the most part, have not). When you say it's not worth it, but you… Read more »
ADHD TRADER
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October 16, 2012 7:41 am

Board of Options Exchange site is: http://www.cboe.com They have tutorials.

David
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David
April 10, 2016 4:31 pm

Also interested in checking the puts service for $60 a month. Would you
share? I’ll share all I know. Thanks.

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