Stock Option Trading in Your IRA...

Tip #4 – Turbocharge Your IRA, Roth IRA, or 401K

Most smart people have set up a Roth IRA, 401(k), or other qualified retirement program. For some of them, it may be the only stock market investment they own. Regardless, they have made a wise move. These plans offer immediate or long-term tax advantages, and relieve the owners from depending on paltry Social Security payments for their retirement years.

But I can't understand why so many of these seemingly intelligent people, after taking the proactive move to set up a retirement account, then sit by passively waiting for something to happen. Usually, they don't use the least bit of effort or creativity to insure that they get a decent return on their invested capital.

Three Great Investment Mysteries

There are at least three great mysteries (at least to me) in the investment world:

1. Why millions of Americans pay billions of dollars each year to mutual fund managers who consistently, year in and year out, do worse than the market averages. See my Tip #3 - Never Buy A Mutual Fund...
2. Why Charles Schwab is the largest discount broker in the country when their charges are 100% - 300% higher than the fees charged by my discount broker (and other discount brokers as well).
3. Why investors do not use stock options to dramatically increase the returns they could earn in their IRA or other self-directed retirement plan.

Writing Calls As An Investment Strategy

For many years, I believed that writing (selling) calls against your stock positions was a low-risk way to dramatically increase your investment returns. For many years, it was true. When the stock option business got started in 1973, and for many years after, most individual investors seemed to prefer to buy short-term options, hoping for a quick run-up in the stock price. Option premiums tended to be higher than they should have been given the volatility of the stocks. During this time, writing calls could be very profitable. One good thing about writing calls was that you could do it in your IRA.

Recently, however, option premiums seem to be too low given the volatility of some stocks. More people seem to be selling calls than buying them, pushing down premiums to a point where it is often more profitable to be buying calls than selling them. A whole host of web sites have been set up advocating the benefits of call writing, and offering hot tips as to the calls with the greatest percentage premium.

If the stock's actual trading behavior is more volatile than the option premiums would dictate, you actually lose money by consistently writing calls against your stock holdings. Most months, you actually do get to collect all the option premium you sold. But every once in a while, the stock soars, and you lose big time on your option sale. Of course, you really don't lose for that month because your underlying stock also went up dramatically. But you lost on the option part.

If, in the next month, the stock falls all the way back to where it was at the beginning of the last month, your option premium gain might not cover the loss in the stock value. For the two-month period, you ended up taking a real loss even though the stock price was the same at the beginning and end of the period.

The bottom line is that writing calls is not a good way to increase the returns you earn in your IRA. It was a good way at one time, and it may be again in the future, but right now, it is not a good strategy.

How to Turbocharge Your IRA

What choices, then, are there to achieve extraordinary profits in your IRA? Fortunately, a few brokerage houses allow you to use option spreads in your IRA. By switching your IRA account to one of these brokers, you can use Tip#6 - The 10K Strategy to Make 100% Every Year

How Long Will It Take To Double Your Money?

I like to calculate how long it will take to double my money. The Rule of 72 is a simple tool to approximate the answer. Divide your annual percentage return into 72 and you get the number of years it will take to double your money (with compounding). For example, if you make 9% a year on your investments, it will take you 8 years to double your money.

If you make 36% each year on your investments, and compound it monthly, you double your money every two years. Thirty-six percent a year is only 3% a month - a reasonable amount to expect if you decide to employ the 10K Strategy to Make 100% Every Year in your IRA investment. Since there are no current taxes on your IRA earnings, making 3% a month will indeed double your money every two years.

The Magic Of Compound Interest

If you start with $10,000 in your IRA, and earn 3% each month, in 20 years you will have $10 million in your account. You can probably figure out some way to retire with that kind of money. Of course, if you continued investing with the 10K Strategy to Make 100% Every Year, you could be taking out $300,000 every month for spending money.

Wouldn't it be worth an hour or two of study to learn exactly how to get these kinds of returns? If you're ready to go, you can Sign Up Now For Insider Status. It could be the smartest investment decision you make all day.

Why Your Broker Won't Tell You About These Strategies

Your full-service broker is not likely to recommend buying and selling call options. They involve many very small transactions (lots of work on the broker's part), and generate very small commissions. On the other hand, these commissions represent a very large percentage of each option transaction. This clearly isn't fair to you.

So in many respects, your broker is doing you a favor by not telling you about these extremely profitable investment alternatives.

All Options (And Stocks) Are Not the Same

To paraphrase the sign on the side of the barn in George Orwell's Animal Farm, All Options Are Equal. Some Options Are More Equal Than Others. Some stocks are appropriate for using my trading strategies, and others are not.

Stocks that pay a significant dividend are usually not good prospects. If you want to keep the same stocks you presently own in your IRA, you may not be able to take advantage of my option strategies on all of them. (While options are available for almost all sizeable companies, the option premiums for many are so small that it is hardly worth selling them).

As a Terry’s Tips Insider, you will learn exactly which stocks and options are the best ones to consider. I do my best not to recommend specific stocks, but will give you a list of popular ones to consider. You probably already own some of them.

Are You Ready To Roll?

By now, I trust that you have read my report "How I made 124% on Fannie Mae (while the stock fell by 8.4%)". If not, Sign Up For My Free Options Strategy Report and get a copy of this report.

This report describes what you can do using my Tip #6 - The 10K Strategy To Make 100% Every Year. And the best part is that you can use these strategies in your IRA. This way, you can accumulate money tax-free until you retire. If you're lucky, or smart, enough to have a Roth IRA, you won't even have to pay taxes on this money when you do eventually take it out.

Using Tip #6 - The 10K Strategy To Make 100% Every Year in your IRA will involve switching your account to a broker who will allow you to put on option spreads in your IRA. Your best bets are OptionsXpress or thinkorswim - they have low commission rates, great websites, and option-friendly features of every imaginable sort. OptionsXpress has slightly lower commission rates, but thinkorswim has superior free option software, and guarantees that your order is sent to the exchange with the best price. You can set up an account on-line at optionsXpress.com or thinkorswim.

If you doubled $15,000 every year, in ten years your IRA would be worth over $15 million. With this kind of money, you could retire early and pursue any (or all) of your exotic dreams.

If you're ready to start, Sign Up Today For Insider Status, and get all the tools you need to start on your way to building a fortune in your IRA.

Stock Options Strategy Book

In the book, I distill 30 years of option trading experience into a clear statement of an extraordinary options strategy. It is called Making 36%: Duffer's Guide to Breaking Par in the Market Every Year, In Good Years and Bad. The book is written with a golf motif to make it a little more interesting, but it is all about this unique way to make exceptional gains using stock options.

There are 18 chapters, each one only two or three pages long, so you don't have to spend hours learning all about options to get the basic idea. If you are interested in learning more about options, there are several appendices that will give you a good understanding of this investment alternative, including a discussion of the "Greek" measures of option prices.

The book was originally published at $19.95. You will receive an electronic version so you can start right away, and the paperback version will be mailed to you free of shipping and handling charges. Order it today at www.Making36Percent.com (Enter the discount code TEE and your cost will be only $12.94, including shipping by First Class mail).

Here is what the book looks like (but the good stuff is inside):

This could be the best investment decision you ever make. At least, you won't be risking much to learn the strategy. And it could change your investment outlook for a lifetime. Total cost, including shipping only $12.94 - www.Making36Percent.com (Enter the discount code TEE).

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