Best way to earn cash in any market.

Start buy finding a great business whose share price has fallen on hard times.

The reason could be as simple as a missed earnings report or decline in expectations. Or it could be as a result of management shakeup. The reason does not matter that much as long as the great business has a clear run way to get back on its feet.

Today's example is Walmart (WMT).

Put option basics

To collect income on Walmart stock I like to sell put options. When you sell a put, you agree to buy a stock at a future date at the price you would love to pay for the business. For selling this insurance to the option buyer, you get paid cash instantly to your brokerage account.

If the stock is below your price (the strike price) on the expiration date you will buy the stock at the agreed upon price. If it doesn't, you walk away with the cash.

This strategy works best when used on companies that you want to own long term.

Walmart is one of the most dominant companies in the world serving nearly 265 million customers every week.

Walmart generated $510 billion sales last year and is still growing. Revenue has been growing at a 4% rate while earnings per share have been growing at 9%.

Walmart treats shareholders well and is a Dividend Aristocrat. Walmart has increased its dividend for 44 consecutive years. It now yields a market-beating 2.1%.

Walmart's share price has struggled recently when it disappointed the market by reporting a slowing on online sales growth.

This was a big overreaction as you can see in the chart below. Walmart shares quickly sold off and are now recovering nicely.

Walmart's stock trades at a good price with an EV/EBITDA of 10.4. That's a 20.6% discount to the benchmark S&P 500 Index, which has an EV/EBITDA of 13.1.

Trade details:

Sell to open, the December 21, $95 puts on Walmart for $2.45 using a limit order. Instantly earn 2.6% on your purchase obligation. If the put expires worthless in two months you will be on track to generate a 15.7% annualized return.

For protection use a stop loss at $82. Shares will be at a new yearly low and it is best to exit the position for a small loss.

Use Walmart as an example of other great businesses that you can sell options against to generate income and fantastic annual returns.

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.

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