Selling weekly options are ideal for generating extra income.
First, they are very, very low risk, an ideal way not just to protect your capital but also to keep it flexible.
Second, you are paying only one commission, when you sell weekly options, and since you goal is to have the put or call expire worthless, there is no commission to close the position.
Third, there are many stocks with weekly options where you can get into a position without using all your capital – General Motors, Delta Airlines, Applied Materials, Foot Locker and many more.
Fourth, if you like a stock but to own it efficiently would tie up most of your capital, you can sell puts against it every week.
And, if own a stock in that account you never trade, you can sell weekly calls against those core assets and increase the real amount of capital you are using to create that extra paycheck.
Maximize Cash While Minimizing Risk
As part of any income strategy because as you can clearly see risks are minimized in a weekly options income strategy.
And this strategy, using simple tools, simple positions, can be repeated every week, over and over again exploiting one or a handful of ideas to put cash in your pocket.
So what weekly options look good right now?
Here are 5 sectors perfect for trading weekly options in smaller accounts.
The Travel Sector
I’m bullish on the travel sector due to baby boomers and millennials’ tendency to spend on travel over material items. What’s more, Generation Z shares its predecessors’ penchant for travel, and this group is set to overtake millennials as the largest consumer generation by 2020.
Expedia (NASDAQ: EXPE) is the 800-pound gorilla in the online travel marketplace. Its brands include Hotels.com, HomeAway, trivago, Orbitz, Travelocity, hotwire and CheapTickets, among others. And they carry very rich premiums for selling weekly options.
And another great way for income traders to play this trend is with online travel agent TripAdvisor (NASDAQ: TRIP).
While shares finished 2018 up 57%, they were also 22% off their yearly highs. I’m sure investors weren’t too happy about the sell-off, but income traders reaped the rewards of elevated volatility — a trend that you know I expect to continue in 2019. Selling puts on the stock every week could earn you an annualized cash return of between 78% and 107%.
The chip sector took a beating in 2018, along with the rest of the semiconductor chip sector. The sell-off in the sector was the result of investors overreacting to news of slowing demand and tariff concerns.
Those who enter the chip sector now are doing so at bargain-basement prices. However, undervalued stocks can remain undervalued for much longer than they deserve, especially when the overall market weakens.
I like Micron Technologies (NASDAQ: MU), which makes NAND flash memory chips, which are used in laptop and desktop computers, smartphones, digital cameras, audio players, video games, and more. The Consumer Tech Supercycle currently underway, in which I expect to see a slew of new and improved electronics products hit the market over next few years, will drive demand for Micron’s memory chips.
I also like Applied Materials (NASDAQ: AMAT) is the granddaddy of the chip equipment business. It makes the equipment that goes into semiconductor fabrication plants, or “fabs.”
But with a put-selling strategy, traders could make annualized returns of 107% to 159% in 2019, even if these stocks stay right where they are.
These days, the trick to investing in the retail sector is finding stocks that are Amazon-proof. At the top of this list is Costco (NASDAQ: COST).
The wholesale retailer is able to keep prices low by charging customers a membership fee. In fact, a 2018 analysis by Business Insider compared prices on 100 items in four areas — household staples, baby and pet, beauty and toiletries, and health — and Costco emerged as “the clear winner.” Nearly 80% of the time, Costco was the cheaper bet.
Costco’s online sales account for less than 5% of total revenue, but they are growing at an impressive clip. In the fiscal year ended last September, e-commerce sales jumped 32%.
As I mentioned before, I’m bullish on the travel sector. However, it’s been a bumpy ride for airline stocks in 2019, most recently with the international grounding of Boeing’s (NYSE: BA) 737 Max aircraft following two deadly crashes in a five-month span.
Overall, though, the four U.S. oligarchs — Southwest Airlines (NYSE: LUV), United Continental (NASDAQ: UAL), American Airlines (NASDAQ: AAL) and Delta Air Lines (NYSE: DAL) — held up well in light of the news.
Of the four major U.S. airlines, I like Delta right now for a trade. The stock has handily outperformed its peer’s year to date. And because they don’t fly the Boeing Max jet, they’ve managed to see their stock price increase this year. Plus, I like that they have rich premiums perfect for selling weekly options.
General Motors (NYSE: GM) may not seem like a trading stock, but the recent volatility caused by the trade war with China has made it ideal for an income trading strategy.
Surging prices for steel and aluminum have hit GM’s bottom line. Last November, the company announced plans to close five North American plants, discontinue several less profitable passenger-car lines and cut 14,000 jobs. These moves show management is adapting to changing conditions by cutting costs and focusing on higher-profit-margin vehicles.
And for all the concerns about “peak auto,” forecasters are only predicting a small downturn in 2019 auto sales of about 1.5%.
One of the great things about selling puts on a stock is that you don’t need shares to move higher to book outsized returns. Selling weekly options on GM each week could result in annualized returns of 48% to 95% a year.
My Options Income Blueprint members are already working our next “weekly paycheck” trade for this week. Start collecting cash immediately when you discover how you could turn next Friday into an extra “Payday”!
About The Author
Michael Shulman is a 30 Year Veteran of the financial markets – as a trader, a financial analyst, a financial writer and most recently as an educator.
Mr. Shulman made his first option trade in 1985 – COMPAQ Computer calls – a position that expired worthless. His second trade broke even; the third brought him a year’s salary, a near twenty to one return on his investment. Michael has never looked back. He entered the financial publishing business formally in 2001 as director of research for ChangeWave Research’s institutional research business and as the writer and editor of Hedge Fund Investing.
He has published two books – Sell Short and Made in America – both of which can be found on Amazon.com and is a frequent contributor to reputable financial sites like Seeking Alpha, MSN, MainStreetInvestor, and Traders Reserve.
His trade recommendations in his Options Income Blueprint, Perpetual Income Portfolio Club and Income Masters services maintain a 98% success ratio, meaning his trades produce the expected income 98% of the time. No one’s perfect.