As many of you know, I am a quant at heart.
Almost every decision I make as an investor is based on a quantitative way of thinking. Probabilities, mean-reversion, the law of large numbers, etc., rule my investment approach.
So, when I see that a commodity that has been beaten down by 50%, 60%, even 80%, my interest is piqued.
As most of us know, the oil sector has taken a big hit over the past several months. The chart above shows the sharp decline in the oil sector.
I know, I know, some “professional” analysts are calling for a move even lower. But if you are truly bullish on the sector over the long term do you wish to lose out on an investment opportunity by trying to frivolously call a bottom?
Contrarians often look like dummies in the beginning. And there is no doubt, those holding positions in the oil sector could be defined as such by some. But again, with the oil sector, 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 burgeoning market at a huge discount just to avoid the possibility of looking foolish. (Go here to see how I’m able to get 65% – 85% discounts on these stocks.)
You can see 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.
Remember, when I say calculated risks, I’m mostly referring to position size. Keep it small.
After receiving numerous questions regarding how to invest in the oil sector, I decided to do a live training session on my favorite income strategy next week.
It’s an easy income strategy to implement, but the problem, at least for some, comes down to capital. For some, acquiring shares of a high-priced stock just isn’t affordable. Others prefer not to up tie up working capital toward 100 or more shares of stock.
There is an alternative . . . and it’s a good one: I call it my stock rental royalties strategy.
The stock rental royalties 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 I SAVE 65% – 85% of the cost of owning stocks.
If you want to know exactly how I apply this income strategy to the oil sector and other key opportunities, please make sure to attend my upcoming webinar.