The specific trades we like for each of those five stocks are:
— Sell COP Nov 60 Puts at $0.30 to $0.65 with shares trading near $66.40
— Sell CBRL Dec 85 Puts at $1 to $1.60 with shares trading near $103.40
— Sell DD Jan 48 Puts at $0.30 to $0.70 with shares trading near $57.85
— Sell GCI Jan 20 Puts at $0.30 to $0.55 with shares trading near $25
— Sell LMT Dec 100 Puts at $0.30 to $0.80 with shares trading near $125.50
For ConocoPhillips (NYSE:COP), for example, you could sell a put that expires in November at an exercise price of $60 for about $0.60. Since each contract covers 100 shares of stock, you would immediately receive $60. COP is trading at about $66.40 a share. If it is trading below $60 when the option expires, you would get the stock at a 10% discount to its recent price, paying $59.40 a share ($60 strike price minus $0.60 premium collected for selling the option).
If ConocoPhillips (NYSE:COP) is above $60 at expiration, you would keep the premium as your profit. Brokers generally require a 20% margin deposit when selling a put, which can be thought of as a down payment on the possible purchase price. In this example, the margin would be $1,200 (20% of $6,000), making the return on investment 5% if the option is not exercised.
Selling options is a great income strategy to increase your gains and allow you to buy stocks on price dips.
Amber has been using this strategy all year, and every trade she has recommended has been a winner.
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