How Cash-Secured Puts Can Lower Your Stock Purchase Price

During their recent episode of the Value Options Letter and Acquirers Podcast, Travis and Carlisle discussed How Cash-Secured Puts Can Lower Your Stock Purchase Price. Here’s an excerpt from the episode:

So far, I mean, look, the market’s been up. There will be much tougher times as well. We’re long term orientated investors.

But of course, the options provide that element of timing to generate income and reduce risk and to manufacture those cheaper entry prices. So we appreciate the subscribers that we have. And while I’m on the subject, Toby, we’ve got two more weeks.

The price doubles in two weeks. So those that become subscribers before July 31st, they’re grandfathered in at $99 a month or $999 a year. That price doubles at the end of July.

[Tobias] So just to recap, the value option strategy is to identify high quality, undervalued stocks that you would want to own and then to find an option trade around that that generates a high enough internal rate of return to justify the cash secured money that you have to put up into the account. You receive a premium. And then that has an expiry date.

So we can calculate an internal rate of return, assuming that the put expires worthless or the option expires worthless. On the other hand, if you have the stock put to you, you want to be very happy that you have invested in that stock long. And the service is to post three to five ideas every week that meet these criteria.

And then we publish all the results and tell you how to trade the position after we’ve established the position. And if the stock is put to you, then we initiate what Tim calls the wheel.