The worst thing that can happen when you own stocks is for the price to go down. We know it and so does every other trader in the world. This last year or two has been a brilliant example of that, as we have seen literally Billions of dollars being wiped off markets from around the world. In fact it’s this very thought that will stop so many people from EVER trading in the stock market. The fear of a stock market crash is enough to send anyone running for the hills, but Planet Wealth are doing the exact opposite. Lets have a look at why it’s not as bad as you might of thought.

We have to look at this from 2 different perspectives:
1. Stock price goes down a little bit.
We bought the stock for $19.97 and lets say they went down to $19.00 by the end of the month. That’s a ‘paper loss’ of 97c. However, it won’t be for us because we have received a premium for renting out our stocks. We received $1.20 in rental premium which would offset any loss made on the fall in price. We own 200 stocks, so we received $240 straight into our account. Then just rent then out again the next month. It’s that easy. The next month, you might rent them out for $20 and get a premium of 90c. That’s a total premium of $2.10 for 2 months or put another way it’s $420 for 2 months trading. If the price then went up to $20 you would have to sell your stocks, but you would be doing so with another 3c profit per stock. So, to add that all up, you would receive a total of $426 for the trade. That’s still a return of 10% for the 2 months, even when the price of the stock went down. If it didn’t go back up to $20 then you would just rent them out again.

2. The stock price goes down a LOT…
The stock price going down is obviously the worse case scenario and is really the only time we can lose money if not handled correctly. To be a long term investor you need to think about the future and that means preserving your capital. This is this single most important rule in trading. You don’t want to be spending years building up a nice little trading account, only to give it back on a few unlucky trades. That sounds like a night at the casino’s if you ask me. Imagine if you had bought $20,000 worth of stocks and the price fell to 20-30% of it’s original value. Really imagine how that would make you feel.
Now, what if I was to tell you that we could remove that risk and minimize our potential loss…..

In the next post, I will reveal exactly how to protect yourself in a Bearish market.

Happy trading!

Regards,

Stuart Ginbey

So, as we mentioned in the last post, you will receive the rental premium into your account straight away (or the very next day). This is yours to keep, no questions asked. However, we do own the stocks, so we need to look at what can happen to the price of XYZ between now and the end of the rental period.

There are generally only three things that can happen to the price of XYZ:
Scenario 1: Stock Price stays the same
Scenario 2: Stock Price goes up
Scenario 3: Stock Price goes down

Let’s look at each scenario separately…

Scenario 1: Stock Price stays the same
This is what we term ‘trending sideways’. When the price continually goes up or down, but only by a small amount. Lets say that by the end of the rental period, the stock price is $20.10 ie below the rental price of $20.50. We have already received the rental premium from when we first started the trade and we still own the 200 XYZ stocks. So we simply rent them out again and receive another premium for the next 4 weeks. If the stock continues to stay the same then we just do it over and over again. Month after month, you will receive money in your account. As easy as that! If you received the same premium each time (it will change) that would be a 6% return every month.

Normally, when the stockmarket is flat and not moving in either direction, it’s very difficult to make money. However, the Renting Stocks strategy is a great way to generate a regular income – when the market is flat.

To find out more about this incredible strategy, please click on the link below, download the E Books and you can get started straight away.

Renting US Stocks Strategy

Renting Australian Shares Strategy

Remember, this strategy can be done on any market!

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.