Do you like getting cash for not doing anything much? I know that sounds a bit scammy but if you’ve heard about the financial instrument called Options, you would know that there is such a thing as “time value” in the investment world which we can use to profit with low risk. (And in my book I tell you exactly how!)
Last I wrote about my trade (here), I did a Covered Call strategy, which allowed me to sell a contract to someone else who want to buy my shares in 6 weeks’ time. That was about 2 weeks ago, at that time the price of the stock was 14.00 and I sold the call option for 46 cents per share (called the premium), which all represents time value as the strike price (or the price that the buyer of the option will buy the shares from me) which is 14.00.
Over the two weeks, the price dipped to as low as 13.75 and yesterday, the price was back at 14.02. The premium is now .305 – why? Because there is less time now before the contract expires (4 weeks to expiry). The time value has decreased, so if I buy back the option (which will close the transaction thus freeing me from the contract), I made 15.5cents per share. Yes, this is making money by selling time (but not my time because I don’t have to do the work!) You have to hold certain number of shares for this to really be worth doing, but this is just to explain to you this powerful yet low-risk concept of selling time!
To illustrate this, I share to you this trading statement:
