Produce a Consistent Cash Flow Using Options - Investing Shortcuts

Produce a Consistent Cash Flow Using Options

By October 22, 2018Options

The holy grail for many retail traders is to find a strategy that puts more money into their pockets each month after taxes than expenses pull out of their pockets. The search for this consistent cash flow can be a long and arduous path of evaluating buy-and-hold investment strategies, futures, options, and even Forex.

If like me, you’ve been around the block a few times in the trading world, you’ll have discovered lots of methods that don’t work, but you’ll also know that it’s possible to find proven systems for consistent success. In this shortcut, I’m going to share my favorite approach, which I call the Cash Flow for Life strategy.

Cash Flow For Life Basics

Unless you have nerves of steel, the foreign exchange market (forex) is not a particularly appealing market to dabble in; there’s so much leverage that portfolio account swings can be pronounced and cause unnecessary heartache.

Personally, I have no appetite for viewing my account value fluctuate by 20% in a day. And the buy-and-hold, while powerful, is slow. Both futures and options are great ways to incorporate some leverage without undue risk and allow for faster returns than buy-and-hold. For this article, I’ll stick to options as a means to produce consistent cash flow.

Favorite Option Spreads

Two options spreads that generate serious income with little risk, particularly when compounded, are bull puts and bear calls. They allow traders make money even if an underlying stock doesn’t move in the expected direction; as long as a stock remains above the short put strike price in a bull put spread or below a short call strike price in a bear call spread by expiration.

Investing Shortcuts - Produce a Consistent Cash Flow Using Options

Bull Put Credit Spread Risk Graph

Investing Shortcuts - Produce a Consistent Cash Flow Using Options

Bull Put Credit Spread Risk Graph

The Power of Expectancy

When you combine bull puts on bullish stocks with bear calls on bearish stocks, you end up with a great cash flow strategy that also provides natural capital preservation; if the stock market soars, the bullish spreads win, and if the stock market crashes, the bearish spreads win.

Because both spreads have limited risk, principal is largely protected. And because stocks mostly keep trending or meandering in the same direction, more often than not the spreads expire worthless. Inherently, that means a positive expectancy cash flow model is constructed.

Automatic Cash Flow For Life

At MarketTamer, we realized many years ago that finding cash flow opportunities was time-consuming. Scanning every stock in the market daily to identify the best income-producing spread trades with the optimal reward-to-risk ratios was a monumental task for any trader (regardless of how experienced).

So, we built a computer algorithm that could do it automatically. We view it as an automatic way to screen for the best trades, with the highest expectancy, while eliminating that most pesky of trading pitfalls: human emotion.

After investing hundreds of thousands of dollars, inviting beta testers to evaluate our system and now having had numerous years of success and countless happy customers, we’re pleased to share that the Cash Flow for Life formula is not the holy grail few will stumble upon, but a very real system available to any serious trader willing to commit to a process of trading success, and an outcome of predictable cash flow.

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Ron Haydt

Author Ron Haydt

Ron Haydt is the President of Ron has taught thousands of traders from all over the world. He's passionate about helping other retail traders protect and grow their stock market portfolio through the application of options instruments. Options trading can often sound very complicated and Ron loves to keep it simple, use proper risk management and improve the trader's overall results.

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