The Greatest Options Strategy on Earth
How this Strategy Works
The Greatest Options Strategy on Earth (GOSOE)
Now, we admit that’s a pretty grandiose title, but this is one strategy that may justify it. Here’s an explanation so you can be the judge.
The idea is to find a stock or index with a good strong trend that our research says will likely continue. We then buy a long-term option that is deep enough in-the-money so it almost acts like the stock. In other words, the option goes up at least 70% of what the stock does–and an even greater percentage as it gets deeper in-the-money.
Then when the underlying gets really over-bought, we’ll sell an out of the money short-term (1 to 2 weeks) option against it to bring in a nice chunk of premium. This short-term intake of cash reduces our cost basis in the long option–and therefore our risk–and creates a really generous short-term return.
The introduction of Weekly options and one-dollar strikes on many heavily traded stocks and indices has made this strategy really attractive because we can pick and choose our expiration dates and strikes to our best advantage.
The beauty of this strategy is we get the potential longer-term appreciation of the long call AND the regular income from selling against.
And if we sell against our long position enough times it could knock our cost basis down to a very low number or even zero and we could STILL be bringing in regular cashflow until the longer-term call expires.