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This Trade Is Set to Be a Winner Five Years in a Row

By Brian Hunt, Editor in Chief, Stansberry & Associates
Friday, October 31, 2014

Over the past four years, Stansberry readers have made 80%-110% on one of the world's safest, cheapest businesses...
 
Today, I'll show how you can use it to generate similar returns...
 
 
In the essay, I recommended buying shares of tech giant Microsoft at bargain prices... and then selling someone the right to buy those shares.
 
This strategy is called "selling covered calls."
 
Back in 2010, you could generate a 17% annual payout by selling covered calls on Microsoft.
 
As regular readers know, Microsoft is the world's dominant software company. It's not a hyper-growth stock anymore, but it's steadily growing... and it pays a reliable dividend.
 
It sounded crazy to say you can use a big, blue-chip stock like Microsoft to produce a safe 17% return. But it was true in 2010. And as I showed readers, it was true again in 2011... and again in 2012... and again in 2013.
 
If you started with $10,000 four years ago and traded in a tax-free account, you'd have between $18,000 and $21,000 today. That's an 80%-110% return. It beats what "ordinary" shareholders have made by 10%-50%.
 
If you're willing to learn the basics of this strategy, you can still use Microsoft to safely collect 17% or more in annual income payments.
 
When you sell covered calls, you collect cash upfront for agreeing to sell your shares (often for a higher price). You give up some of your potential capital gains for guaranteed income and added safety.
 
So this practice isn't for gamblers shooting for the moon. This is for folks interested in a safe 10%-20% return in a year.
 
You can read more about how it works here. But let me show you what the numbers look like using this strategy with Microsoft...
 
Right now, you can buy Microsoft for around $46 per share. You can then sell the December $46 calls for around $1. That produces an instant "yield" of 2.2%.
 
The calls expire in December, a little less than two months from now. If the stock stays where it is or moves lower, you keep your shares and Microsoft's upcoming quarterly dividend... and you can sell another round of calls. This trade produces an annualized gain of 20.8%.
 
If the stock is trading above $46 by then, you sell your shares at $46. And you can do it all over again.
 
With today's call prices, you can collect more than 20% a year on a cheap, dominant tech stock.
 
This trade has been a winner for four years in a row. I expect it to be another winner in year number five.
 
Good trading,
 
Brian Hunt

P.S. Starting Monday, my colleague Dr. David Eifrig will be hosting a four-day training series on trading options. If you're interested in earning extra "instant" income – you should view this training as mandatory. And if you register right now, you'll pay nothing for this invaluable training. To get your name on the list, click here.



Further Reading:

Jeff Clark says selling covered calls is "the single best income generating strategy ever created." He has used it to make a fortune for himself and his readers over the years. To learn more about selling covered calls, read this interview with Jeff.
 
Selling options on quality stocks can also dramatically increase your trading success – especially during market fluctuations. "The market will always fluctuate," Dr. David Eifrig says. "But selling options on quality stocks will remain stable." Click here to learn more.

Recent Articles
Market Notes
Major gold producers plummet... Goldcorp, Barrick Gold, Newmont Mining, Yamana Gold, and Agnico Eagle all sink to 52-week lows.
 
Social-media stocks pull back... Twitter, TripAdvisor, and LinkedIn are all down double digits in the last two months.
 
"China's Google" Baidu continues to rise... shares soar 40%-plus in 2014.
 
"Big Pharma" uptrend chugs along... sector fund IYH is up more than 20% over the past 10 months.
From The Crux
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1988.86 +0.3% +12.8%
Oil (USO) 30.77 -1.5% -11.7%
Gold (GLD) 115.50 -0.8% -10.9%
Silver (SLV) 15.81 -3.5% -27.7%
U.S. Dollar 86.17 +0.2% +8.1%
Euro 1.26 -0.3% -8.3%
Volatility (^VIX) 14.35 -5.3% +5.1%
Gold Stocks (^HUI) 167.80 -5.6% -31.7%
10-Year Yield 2.31 -0.4% -8.7%

World ETFs
Symbol Price
Change
52-Wk
India (IFN) 27.13 +1.4% +36.9%
USA (SPY) 199.58 +0.7% +15.4%
Taiwan (EWT) 15.56 +0.1% +9.2%
China (FXI) 39.53 +0.3% +7.3%
Israel (ISL) 16.96 +0.6% +10.5%
Canada (EWC) 29.87 0.0% +3.8%
S. Africa (EZA) 68.77 +1.6% +6.1%
Singapore (EWS) 13.16 +0.5% -1.8%
Japan (EWJ) 11.53 +1.1% -2.3%
S. Korea (EWY) 59.31 +0.5% -7.5%
Lat.America (ILF) 36.34 +2.7% -7.5%
Russia (TRF) 12.15 +2.2% -19.6%

Sector ETFs
Symbol Price
Change
52-Wk
Biotech (PBE) 50.09 +1.5% +41.7%
Semis (PSI) 22.10 -1.5% +26.2%
Health Care (IYH) 140.96 +1.6% +28.1%
Transportation (IYT) 154.76 -0.9% +24.6%
Big Tech (QQQ) 100.06 +0.3% +22.4%
Utilities (XLU) 45.33 +1.9% +20.8%
Defense (PPA) 33.24 +0.8% +16.5%
Real Estate (IYR) 74.31 +0.7% +15.8%
Financials (IYF) 86.13 +1.1% +13.9%
Industrials (IYJ) 103.50 +0.6% +11.2%
Consumer Svcs (IYC) 126.51 +0.6% +10.9%
Insurance (IAK) 48.25 +0.8% +8.5%
Basic Mat (IYM) 82.53 +0.8% +8.4%
Software (PSJ) 36.75 +1.4% +9.2%
Telecom (IYZ) 30.18 +0.8% +5.1%
Water (PHO) 25.71 +0.8% +3.9%
Media (PBS) 24.64 +0.3% +3.3%
Construction (PKB) 21.38 +0.9% +1.7%
Retail (PMR) 34.33 +0.2% +0.5%
Alt. Energy (PBW) 5.88 +0.3% -6.2%