VISA Stock has been in my portfolio since 2007 when they first came to market. I could never figure out why investors bailed out of VISA Stock during the 2008 to 2009 credit crisis as this company is nothing more than a money-making machine. In 2008 VISA Stock fell to a low of $43.54 which was below its IPO price and then in January 2009 I bought 2000 shares for my grand kids at $42.00. That stock was tucked away for them until this past July when I sold it for $132.00. It isn’t Apple Stock but the return of 214% will go a long way toward their Higher Education when that day comes.
VISA Stock Put Selling Goal
The above trade aside, the Put Selling goal of Visa Stock is to eventually accept assignment of shares that are paid for with other people’s money. This is the ultimate goal of Put Selling.
While many people look at Put Selling as a way to earn income, it can also be used for other investing purposes.
Put Selling Benefits
One of the best Put Selling benefits is picking a great company, and selling puts on that company to raise additional capital. Through profits earned a put seller has additional capital available to invest in more Put Selling of their favorite stock. For example, many dividend investors use DRIP to cost average their way into additional shares of their favorite dividend paying stock. The same methodology can be applied to Put Selling a stock.
I started Put Selling Visa Stock with small put contract sizes. This is because I did not want to apply too much capital to the Visa Stock position. In 2009 when I started Visa Stock Put Selling I had a limited amount of capital available to put into Visa Stock Put Selling. As I have earned more I have been able to increase the number of puts being sold. Rather than pulling the income from my Put Selling trades I have continued to increased the number of puts being sold. I have gone from 3 and 4 put contracts to 10 put contracts, but almost half of those put contracts today are being paid for by the profits earned over the past 4 years of Put Selling Visa Stock.
To date I have earned $51,700 in profits through Put Selling Visa Stock. For Oct 2012 I am holding 10 naked puts at the $120 strike which I sold on August 24 for $1.55. This added another $1500 in profits after commissions. Since July I have earned over $4300 through Put Selling Visa Stock and increasing the number of put contracts. My plan is to try to double that amount by the end of this year. That will bring my total profits in Visa Stock to $56,000 which would pay for almost 500 shares of Visa Stock at $120.00.
Goal of Visa Stock Put Selling Strategy
The goal of my Put Selling strategy for Visa Stock has been to earn profit, reinvest that profit back into Visa Stock Put Selling and eventually own shares with other people’s money. Right now with $51,700 earned, this means that of the $120,000 needed should I be assigned the 10 put contracts for Oct at $120.00, $430 shares would be paid for with other’s people’s money. Meanwhile margin from the profits made in Visa Stock would pay for another 300 shares. That means my capital is at risk for just 270 shares which at $120.00 works out to $32,400.
So out of $120,000 which would need to be applied to cover 10 assigned Visa Stock puts at the $120 strike, I only need $32,400 of my own capital and going forward each profitable trade continues to reduce that amount required.
Investing With Other People’s Money
This has to be the ultimate high for an option selling investor. Owning shares in a quality company, completely paid for with other people’s money. This is what happened in 2011 with Kraft Stock when I had earned $17800 over 3 years of trades which was enough to own 500 shares paid for with other people’s money. What a great feeling it is to know that each time I pick up shares in a company, the majority of those shares has cost me nothing but the profit earned through Put Selling.
Meanwhile what I want to talk about is my latest VISA Stock trade and my outlook for the stock as well as the strategy if Put Selling going forward.
Visa Stock and Put Selling Goal
My Put Selling Visa Stock trades over the past 4 years have gone a long way toward reaching that ultimate goal. The Put Selling strategy at this point remains exactly the same. When I reach $60,000 I may pull back from put selling 10 contracts and instead reduce the number of contracts to those covered by the $60,000 earned and use margin to sell deep out of the money puts to basically “juice” the annual return a bit more. That then means none of my original capital will be needed for Visa Stock and I will consider another company to apply my Put Selling strategy to.
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