Simple Way to Earn An Extra $250 For The Holidays

in #money6 years ago

After years of low stress the stock market is kicking us where it hurts.

The benchmark S&P 500 Index has likely started a long-term downtrend after a monthly close below the 10 month moving average.

Tech and other high growth areas will be the worst hit sectors but we can still make money in the areas that either do not fall very much or even can buck the trend.

After years of underperformance verse the tech darlings, S&P 500's best-performing sector is consumer staples up 9.8% this year. A best of breed consumer staples is members-only retailer Costco (COST).

Over the past 12 months, Costco's sales topped $141 billion. And it had a stable and growing 2.2% profit margins. Its earnings per share ("EPS") spiked 58% from $4.49 in 2013 to $7.10. Sell the basics works for Costco as they are able to grow sales most years even during troubling times. That consistency is worth its weight in gold. Costco has a fantastic ROE of 26.6%.

Costco shares are still in an uptrend with a rising 200 day moving average.
cost.png

Trade details:

Sell the December 21, $210 puts on Costco for $2.50 using a limit order. Earn 1.2% upfront fro agreeing to buy shares at a 4% discount.

At expiration if shares are above $210: put sellers will keep the $2.50 earning a 17.4% annualized return.

At expiration if shares are below $210: put sellers will buy shares at a 5.7% discount.

For protection use a stop loss at $198. Below this level shares will be in a down trend and it is best to take a small loss to live another day.

If you need extra money for the holiday's take advantage of Costco's current share price and collect $250 per option sold.

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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