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 youR