Ok. So now let’s say we a situation where the stock price has gone up to $20.70 and is above the rental price of $20.50.
If this is the case at the end of the rental period, then we will be forced to SELL our 200 stocks at $20.50 instead of $20.70. But that’s ok. In fact, it’s what we want to happen. Don’t forget we still have the premium from when we placed the trade.

We also bought the stock for $19.97 and if we have just sold them for $20.50, then we have made a 53c profit, plus the price of our original premium.
That’s 200 stocks x 53c = $106
Plus
Rental premium of $240
Total profit for 4 weeks equals $346

That equates to a return of 8.7% for the month.

Of course, we now don’t have any stock left, so we simply start again from scratch by purchasing some more stock (either the same company or different) and renting them out again.

In the next post, we’ll have a look at what happens, if the stock price goes down. It’s no-where near as bad as what you might think.

Until then,

Stuart Ginbey

www.planetwealth.co.uk

We use the term ‘Renting Stocks‘ as a simplified version for ‘Selling a Call Option’ or ‘Writing a Covered Call’. When options trading is mentioned, people will quite often run a country mile, but we would like to show you an incredible strategy that will not only give you protection in a downwards market, but also increase your profits.

Here is an example to show you how it’s done.

XYZ is trading at $19.97 and lets say we own 200 stocks.
Therefore the cost to purchase the stocks =$3,994
We want to rent them out, so we write a covered call on 200 XYZ stocks
1. Say we choose an exercise price of $20.50 to expire in 4 weeks time
Lets say the premium is $1.20c per stock.
We would automatically be paid $240 into our account. (200×1.20c=240)

This may not sound like much,yet, but how would that look if you had 2000 stocks? And for only 4 weeks.

So, what do you need to do?
2. Call your broker and say: I want to write a covered call on XYZ with an exercise price of $20.50, with a January expiry and a premium of $1.20c.

You have just spent 3 minutes on the phone and received $240 into your account.

This can also be diversified across different stocks that you may already own.

So that’s the basics of the trade. Just to re-cap:

1. Choose and buy stocks

2.Choose a Rental Price

3. Choose a Rental Period

4. Rent them out and receive Rental Payment in Advance

Stay tuned and we will find out what happens at the end of September.