Take The Cash When Wall Street Over-Reacts

Michael Shulman

Wall Street is famous for over-reacting to world events by either rewarding bad stocks or punishing good companies.

Many times that hurts individual investors but for us “income traders”…we actually like it. We use that reaction to take even more cash from the Street’s misfire by selling weekly options.

Let me explain.

Right before the Labor Day weekend, Hurricane Irma was about to hit the Caribbean Islands and Florida, which resulted in a sharp sell-off in cruise ship stocks the next week.

One of my favorite cruise line stocks, Carnival Corporation NYSE: [stock_market_widget type=”inline” symbol=”CCL” template=”basic” color=”default” refresh_frequency=”0″] hit a temporary bottom giving my Options Income Blueprint members a chance to sell put options and collect an extra weekly paycheck.

A day later, with CCL trading at around $66.75, we sold CCL 66.50 put options with the goal of collecting $.58 per share or $58 per contract that was to expire in 2 days.

Irma mushroomed into a Category 5 hurricane and started tearing into the Leeward Islands and threatened the entire Caribbean chain — a favorite touring ground for cruise lines.

Predictably, Wall Street over-reacted and Carnival stock sold off the next day and we were forced to roll our puts into the following week but in the process we collected an extra $.28 or $28 per contract giving us $96 for the trade.

On Monday, after Irma made landfall in Florida and the impact was damaging but not “catastrophic”…cruise ship stock prices immediately climbed and CCL jumped back up to $66.77 and we closed the trade by buying back our put options for $.15 each.

We netted $0.81 or $81 per contract from our position and by selling 3 option put contracts that gave us a nice profit of $243 in just 8 days on the miss-read by “the pros.”

And this will happen again and again. Why not find out how you can grab more cash for yourself from the next Wall Street over-reaction.

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. He 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 he is a frequent contributor to reputable financial sites like Seeking Alpha, MSN, MainStreetInvestor, and Traders Reserve.

Most importantly, since 2010, he has dedicated himself to teaching income investors how to get more income from their portfolios using simple yet safe options selling strategies which produce income every week. This approach was developed from the ground up in Mr. Shulman’s own accounts, his goal to develop a strategy that cannot be replicated by institutional investors of any size and therefore independent of fads and trends that change too often to provide a consistent approach for individual traders.

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.