Almost every decision I make as an investor is based on a contrarian way of thinking . . . and probabilities, of course. So, when I see that a commodity necessary for societies around the world to function is off 80% and coming off historic lows, I begin to search for the best way to take advantage of the opportunity.
Yes, I’m talking about oil. I know, I know, some “professional” analysts are calling for a move to $10 a barrel, but I’m not willing to lose out on an investment opportunity by trying to frivolously call a bottom.
Contrarians often look like dummies in the beginning. But with oil, it’s about the long term. As an investor, what I don’t want to risk is potentially losing out on an opportunity to invest in a crucial resource at a huge discount just to avoid the possibility of looking foolish. As an investor, I couldn’t care less about the opinions of others. I simply focus on my own research and attempt to take calculated risks that will put me in the best position to succeed.
After receiving numerous questions regarding how to invest to invest in oil, I decided to do a live training session on my favorite income strategy right now: Delta Codes.
Most of us have used, or at least heard about, covered calls.
Buy a stock, sell calls against it.
It’s an easy strategy to implement, but the problem, at least for some, comes down to capital. You must have at least 100 shares of stock to sell a call. For some, acquiring 100 shares just isn’t affordable. Others prefer not to up tie up working capital toward 100 or more shares of stock.
There is an alternative to a covered call strategy. And it’s a good one… I call it my Delta Code strategy.
My Delta Code strategy is similar to a traditional covered call strategy, with one exception: Rather than buying 100 or more shares of stock, I simply buy an in-the-money LEAPS call and sell a near-term out-of-the-money call against it.
LEAPS, or long-term equity anticipation securities, are basically options contracts with an expiration date longer than one year. LEAPS are no different than short-term options, but the longer duration offered through a LEAPS contract gives me the opportunity for long-term exposure.
I buy LEAPS and get the same ability to sell calls against them, but SAVE 65% – 85% of the cost of owning stocks.
Tomorrow I will discuss both . . . I want to first educate everyone on how I use Delta Codes to pick which LEAPS to buy, and then follow up with a LIVE trade that takes advantage of a potential run-up in oil.