Great business at good prices.

This is the key to long term wealth as well as short term income trading.

Great businesses have surviving power living through recessions and thriving during booms. By waiting for when they trade at good prices they are less likely to experience large share price drops.

These two factors alone should lead you to higher returns than most other investors and traders with much less risk.

The $240 billion company Cisco is focused on hardware (leading maker of routers and switches). Hardware is still a huge part of Cisco's business, however, the company is following the trend of software and services (which are higher margin products). The new services by Cisco helps companies connect, monitor, analyze, and expand different parts of their businesses.

Cisco generated a record $51 billion in sales over the last 12 months with 32% of that recurring revenues from software and services. Cisco has an impressive 24% profit margin, is growing earnings per share by 24% and produced a record $15 billion in free cash flow (FCF). (Companies use FCF to reward shareholders with dividends and share buybacks.)

Cisco's FCF has been trending higher over the last 20 years. The company uses some of its cash to pay a big 2.5% annual dividend (which is increasing at 14% per year for the past five years). They also hold enough cash on hand to pay off all its debt and still have $11 billion left over.

This type of world-class business with such metrics usually trade at a premium. Yet the stock trades at a reasonable price with an EV/EBITDA ratio of 14.5.

In the chart below, you can see that Cisco's stock price is creating a bullish base after a big move higher early this year.

The stock is in a big uptrend and consolidating near recent highs.

Trade details:

Sell to open, the July 19, 2019, $55 puts on Cisco for no less than $1.20 using a limit order to earn an instant 2.2% payment on your purchase obligation. (We are entering the order expecting Cisco share price to drop a bit in order to be filled.) Perhaps the market will experience some volatility when the Federal Reserve releases the meeting statement.

At expiration if shares are above $55: put sellers will keep the $1.20 for a 26.6% annualized return.

At expiration if shares are above $55: put sellers will buy shares at a 4% discount to yesterday's closing price. Then you can sell covered calls to earn more income.

Use a stop loss at $48. Share will have broken October and December highs which currently act as support. Take a small loss and look for the next opportunity.

By selling puts and covered calls at the right time you can make consistent profits with Cisco. The company is growing and the stock trades at a good price. Collect cash today buy selling put options.

Disclosure: I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. The information provided should NOT be considered advice. The topics discussed are risky and have the potential to lose a substantial amount. I am not an investment professional and therefore do not offer individual financial advice. Please do your own research before investing.