In this episode II’ll show you how to utilize stock options to increase your wealth… And much more.
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About Indestructible Wealth: I’m Jack Gibson. I’m your wealth strategist and I’m here to help you make some money. The Indestructible Wealth Podcast is for young entrepreneurs who want to make, keep and grow wealth to enjoy now, and for years to come.
Episode #70 – How to Generate Immediate Income, While You Wait
Podcast Episode Transcripts:
Disclaimer: Transcripts were generated automatically and may contain inaccuracies and errors.
My Mom used to always tell me “you can’t have your cake and eat it too”. I never really understood what she meant. I mean, what kid wants to stare at a delicious cake and not devour it? It wasn’t until years later that I learned it was an idiom; a figure of speech that meant you have two good things that are impossible to have at the same time. It also means having the good parts of something without having to deal with the bad parts. An example would be parents that think they can have excellent schools for their child without paying high taxes. There are two options that you want, but you can’t have both because they conflict with each other.
The reality of investing for most people is they buy things and wait for them to go up. They are literally just staring at their cake (investment account) without actually eating it (spending the increase). It’s why so very few can stick to a plan like this where you wait for decades to spend and enjoy the fruits of your delayed gratification. The vast majority that buy stocks or crypto simply hope and pray that they rise in value, that someone down the line will pay them more than they bought them for. But what if you could have your proverbial cake, and eat it too? What if you could buy assets and generate cash flow from them while you patiently or most likely impatiently wait for them to appreciate? For impatient people like me, we don’t like sitting back and doing nothing. After all, we did not become strong six figure earners by sitting back and being patient. We drive results with our aggressive actions. We like to be in control of the outcome as much as possible. Buy wait and pray goes against our nature.
When the market went against me back in 2000, I was 21 years old and just lost half of the $50,000 I had saved up. I learned many lessons: position sizing, risk management, and diversification. But one of my biggest lessons learned was you can’t build your portfolio solely with high-risk assets. I used these same lessons and strategies to build what I have today. It gave me the edge I needed to get back on top. And those are the same lessons we’ll use in our strategy. To truly build long-lasting wealth, you need to generate multiple, reliable streams of income… in addition to your riskier strategies. It may seem paradoxical… but the more “safe” income you build, the more “free” income you’ll have to speculate on high-risk, high-reward plays. But you must build the base of your wealth on a solid foundation of multiple income streams. And the income strategies with stock options can help you generate 15%, 20%, even 30% or more per year on your money – safely. Some of you will use that extra money to make more life-changing, asymmetric “cryptotype” plays (without risking your current lifestyle). Others will use it for dream vacations or second homes. And I’m sure many of you will be able to use this income to pad your retirement nest eggs. The point is that when you have steady income coming in – separate from your employment/main source of income – you’ll have so many more choices in your life. You can spend money on your hobbies without guilt. You can buy your spouse expensive jewelry without the nagging worry of a credit card bill looming in the back of your mind. When you have more money coming in than going out, every aspect of your personal life will improve. And that’s only done by design with the Indestructible Wealth Method: Provide streams of income that you can invest or spend on whatever you want, whenever you want – guilt-free.
Let’s face it. You love to make money. You value a strong income. There is nothing wrong with that, in fact, that drive is what built America to the economic powerhouse that we are today. If it takes over your heart and your soul and money becomes your God, well then, that is where things get ugly. I’m banking on the fact you’re a good person, who wants to do good things for others, including your family, your community, your country and your world. In order to maximize the impact and the mark you can leave on the world, you need money.
As I write this, the Russians are in a full scale, horrific attack of Ukraine. My heart is hurting watching the story unfold. There is a piece of me that wants to go over and join their fight, to be a part of something so much bigger than myself – the defense of freedom. These people live in a sovereign, free democratic country and their citizens are being brutally attacked. I have no combat skills, and I’m certain I’d be a liability more than an asset. However, there are former military who have the skills and want to go join the fight. I can pay for plane tickets for them to go, with the cash flow from my investments. So although I cannot realistically fly there and be useful, I can send those who can be, without adversely affecting my family, because I have income streams from real estate, stocks and crypto. Not only can I finance a small piece of the fight, I can donate to humanitarian causes to aid refugees. I do not want my life to be about the accumulation of money. I want it to be about making a difference.
How do we create income while we wait for our assets to appreciate? We rent or lease them out. In real estate, as I’m sure you’re already aware, you rent your property to a tenant. This is easy for us to understand because all have likely participated in the rental market in some capacity, typically as the renter of an apartment, home, commercial space for our business, or even a storage locker. What we haven’t done is leased our crypto, or helped to secure and validate transactions in the crypto space, which is also referred to as staking, lending or mining. You don’t need to buy crypto and wait through the incredibly exhilarating price pumps and the inevitable market crashes. You can create streams of crypto based cash flow to reduce your risk while you wait for it to make it’s next all time high, and to alleviate your discomfort, you do not have to be technical in nature to do any of these things. I promise you I am not.
With stocks, you can also create strong income streams through options. Dividends are a great source of income from stocks, but the average dividend yield currently sits at 1.27%. That is hardly going to make any meaningful difference in your finances anytime soon. With options, you can generate 20-30% annualized returns. Anytime you create income from a stock you own or you’re willing to buy, you effectively lower your risk because your cost to own that stock has now dropped. Let me give you a basic example of how this works.
You’ve found a great company that you’d love to own. It’s a blue chip, solid company that gushes cash. It’s going to be around for a very long time. I just recently did this with Microsoft actually. That’s a great company that produces billions in free cash flow. I doubt this stock is going to collapse anytime soon, but it’s also not going to go up by much as most of it’s large growth is behind it. That’s the reality of blue chip stocks – they are very stable but most of their gains have already been priced into the stock. The price of the stock is, let’s say, $30. Bill owns Microsoft stock, and he’s very concerned that the market may drop. So Bill wants to buy insurance that protects him if the stock drops suddenly, called a put option. He pays you $3 per share, which means you are agreeing to buy the stock if it drops below a certain agreed on price. The minimum you can buy is 100 shares, called a contract. So you collect up front $300 in cash. Should the stock drop below $27, then Bill can “put it to you.” That means you are then forced to buy the stock. You have to have the cash in your online trading account to be able to purchase the shares at any time should they drop below the agreed price between you and Bill. So, 1 of 2 things can happen. 1) The price of the stock does not fall below the number where you agreed to buy it. So, you keep the “insurance” money that Bill paid you, and he still owns the stock. You can decide to do it again on the same stock, or pick another. 2) The stock drops below the agreed on price, and you have to buy it from Bill. If the price is $30, and you collected the $3 from him, it means you now own the stock at a cost basis of $27 per share. You are happy to buy the stock, because you believe it’s a great company. Now that you own the stock, you turn around and sell an “Instant Cash Listing.” Another investor, rather gambler, thinks that the price is going to go up quite a bit, so he pays you $3 a share for the rights to purchase the stock from you if it hits a higher price. You collect that $300 in cash upfront, and then wait to see what the stock does. If it stays below the agreed on sale price, you keep the option money, and the stock. If it goes above the agreed price, you sell the stock for an additional profit beyond the $300 in cash you received, and you sit back and wait for the next actionable trade.
This is the beauty of doing this. I did this for several years when I first started out as an investor. Why? Because I wanted to create another stream of income. I made thousands of dollars doing this, and I’m kicking myself for not continuing. Why did I stop when it was working? I got too hyper focused on real estate, so I sold all of my stocks and went all in on that. And this is what I’m here to tell you: you need multiple strategies to produce significant wealth.
I’m sure you’re asking the question, ok it sounds great, but how do I find the stocks? I don’t have time or energy to pick stocks and figure this out. Of course I have an actionable solution for you. Since 2013, the elite trading service, Alpha Edge, has executed 377 trades since 2012. Of those, 369 closed as winners. That’s good for a 98% win rate. That kind of performance is better than any trader I’ve heard of. Just got to palmbeachgroup.com and you can sign up for this service. I would recommend investing at least $10,000 to do it, as all options contracts are based on 100 shares of a stock, and it’s not worth the time or energy in my opinion to do it on less.