Kansas City Southern (KSU): Generate 12% a Year for the Chance to Buy This Quality Stock at a Discount

Today, I want to sell KSU Oct 100 Puts, which are trading near $1.95. By selling one put option contract, we are obligating ourselves to buy 100 shares of Kansas City Southern (NYSE:KSU) at $100 per share should the stock drop below this price point when the puts expire on the third Friday in October.

Considering our obligation, we will want to set aside enough capital in our account to be able to buy the stock if it trades down to this level. But keep in mind, we sold the puts for $1.95, so our net cost would actually be $98.05 per share, or $9,805 per contract, an 8.5% discount to recent prices.

The most likely scenario for this trade is for Kansas City Southern (NYSE:KSU) to remain above $100 and for the puts to expire worthless. In this case, we would realize a profit of $1.95 per share, or $195 per contract, versus the $9,805 in initial capital that we set aside in case we were obligated to buy the stock. This represents a 2% return over a 59-day period, or just over 12% a year if we were able to repeat a similar trade every 59 days.

Considering the low interest rate environment, our put selling strategy can generate some very competitive rates of return. Better still, the opportunity to buy quality stocks like Kansas City Southern (NYSE:KSU) at discounted prices makes this strategy a tremendous resource for your long-term investment portfolio.

As interest rates rise, the premiums we receive from options should also increase, allowing us to continue to generate gains that are well above the returns investors can expect to receive from more traditional income opportunities.

My colleague, Amber Hestla-Barnhart, has used this same strategy to help her subscribers make a minimum of $1,873 this year. And readers are easily scaling up to make $6,000, $19,500, even just under $150,000. Click here to learn how you, too, can start making this Instant Income.

$1,000 Per Month Trading System

You could collect $1,000 or more per month without buying a single stock. Click here to learn how…