since you asked for it in this video i'm
going to show you how to trade options
in a small account i'll do this using
some of my real live trades
so you can see how i go about selling
covered call and put options in a small
account
hello and welcome back to my life of
learning my name is randy perez
please know that i am not a financial
advisor and this video is not meant to
be investment advice of any kind
i am however a 22 plus year stock option
trader as well as real estate investor
before we get started i just ask one
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thank you for that let's get started
today i'm going to show you exactly
how i sell covered call and put options
in a small account
we're going to do this by looking at the
details of four different positions
we've been trading in over the past year
here you see all the trades we've done
in our first small account position
this account is a roth ira it's a new
account for us
and i can only contribute six thousand
dollars a year into this account
so it is indeed a small account here are
the trades that i did beginning on
august 12th
and medical properties ticker symbol mpw
briefly here are a couple reasons why i
chose mpw
my primary goal in selling options and
on occasion buying stock outright
is to number one protect our capital
it's not money that we're
gambling with the cash we've pulled
together is money we want to protect
while investing in such a way that we
get a solid return
medical properties trust is almost a
pure play on hospitals no matter what
happens in good
and tough economic times we all need
hospitals this is a sector of the real
estate world that will
always be in demand so as long as the
company is run properly
it should consistently produce cash flow
i know the nice thing about mpw
is that its current price is under 23
dollars per share
that's one reason why i chose medical
properties to sell
options in my small new retirement
account let's discuss the trades i've
done over the past eight months in my
small account
using this company here you see a list
of all medical properties trades we've
done in this account
since august 12. let's talk through
these trades using the medical
properties chart
so you can see how much and when we
collected cash
by selling put and covered call options
in it i think you'll see that even in a
small account
using what i consider a stable solid
dividend paying company
that have a lower price you can still
collect
nice premium we began selling put and
cover call options and medical
properties as you can see on the left on
august 12th
we sold the 19 put options for 65 cents
per share
about a month later medical properties
had dropped to around 17
per share so on september 18th we were
assigned
100 shares of mpw at 19 per share
we immediately sold the november third
friday of the month
19 coveted call options and received 35
cents per share
fast forward to november 19th and with
medical properties trading right at our
short strike price of 19
we rolled that covered call option out
to december for an additional 37 cents
per share
fast forward three weeks and the covered
call option was assigned
so the stock was called away from us and
we immediately sold the january
20 dollar put options for 47 cents per
share
notice that we rolled the strike price
up by a dollar
i felt comfortable doing this because
the technical supported this new higher
short strike price put option then on
january 16th
that short put option expired worthless
so five days later we sold the march
21st put options for 65 cents per share
on march 18th we rolled that 21 put
option out to april
for an additional 35 cents per share
finally on april 17th
the third friday of the month the april
21 put option expired worthless
now we're looking for another
opportunity to sell a new put option
in medical properties if it were to come
back down to around that 22 dollars per
share
area in all as you can see here in the
yellow box
since august 12th of last year or about
eight and a quarter months ago
we have collected two dollars and 84
cents per share by selling put
and then once the stock was put into our
account selling covered call options and
medical properties
that equation approximately 20.7
annualized non-leveraged cash on cash
return
and note that i didn't say anything
about dividends the reason is that when
the stock was put into our account
as a result of put options that we had
sold back on september 18th
the stock was actually caught away from
us right at the ex-dividend date which
was december 9th so we actually did not
receive any dividends in medical
properties
over this 11 plus month time period if
we had then the return would have been
even higher
so here's an example of a stock that at
most when you're selling the 21
puts if you did one contract which
equates to 100 shares of stock
then at most you would need 21 times 100
shares
or 2 000 cash in your account to be able
to do a trade like this
without using any leverage at all one
challenge with a small account
is that as you see and hear people talk
about how much money they're making
and the dollar figures they're so big
compared to the relatively smaller
amounts that you're receiving by trading
with a small account
just remember that even those larger
accounts at one point
most likely they were started out as a
smaller account
as you can see selling put and covered
call options is an
excellent way to over time turn a small
account
into a larger account and along the way
as you progress in your option education
you'll be able to make mistakes without
losing a huge sum of money that you
might lose
if you had a large account then once
your account size has grown into a large
account
you will have learned from your mistakes
and hopefully you'll be able to minimize
those new mistakes
so you're able to consistently generate
awesome returns and cash flow in your
account
the second trade i want to share with
you is in flowers foods
ticker symbol f-l-o flowers is best
known for its breads and snack cakes as
well as tortillas
they are in the consumer defensive or
non-cyclical sector
in addition to flowers being a solid
stable mature dividend paying company
that's fairly stable in price another
reason why i like to trade options in
flowers
is because no matter what's going on in
the economy whether it's in a recession
or the economy is booming
we all have to eat flowers is the number
two bakery company in the united states
some of these brands lead the industry
and are ranked number one for loaf and
organic breads
no it's not some high-flying wild
company but it is one that i feel
confident trading in that i know will
not go out of business overnight
that matches my number one rule of
investing in trading which is to protect
our capital
flowers is just one of 250 stocks that
we track on a daily and weekly basis
looking for opportunities to trade
options in it over the past year we've
only seen
one opportunity to get a nice return
using options and flowers when we had
cash available
here are the details on the trade that
we did on february 9th with flowers
trading right at 22 and a half dollars
per share we sold the march
22 and a half put options and received
83 cents per share
fast forward 30 days and on march 11th
those 22 and a half dollar put options
were only worth 10 cents
so we bought them back to close the
position now as you can see here the
result is that we netted 73 cents per
share
for the 30 days that we were in this
trade if we annualize that return
it equates to a 39.5 percent annualized
non-leveraged cash on cash return again
this is a stock
that the time we sold the put option in
it was trading for less than 23 dollars
per share
so here's a trade where you could have
made about 73 dollars in 30 days
while only needing to have hundred 2
fifty dollars
cash in your account if you didn't wanna
use margin of course you could have used
margin for this position here you see
that two days after we initiated this
trade
the margin requirement was only one
thousand four and seventeen dollars and
twenty nine cents for the five
contracts that were short so the margin
requirement on this day
and keep in mind that the margin
requirement changes as a stock moves
around
but their margin requirement on this day
was 283 dollars per
contract or per 100 shares that we were
on the hook for if the put options were
assigned to us now i by no means
am encouraging the use of margin however
i know some options traders
myself included when i first started
trading options like to use margin so i
thought i'd share with you what the
marginal requirement was on this
position
two days after we initiated the trade
again a very good return
on a lower price stock by the way if
that was really useful would i just
share with you then i'd love it if you
just give this video a like
just bump the like button and thank you
so much for doing that
let's now go into a stock that many
people are familiar with and that's att
since june of last year or right at 11
and a half months or so
we've been selling put options in att we
actually have not had any of them
assigned to us as of yet
here where you see that white line is
located at that's the strike price that
we've been selling put options at over
the past
year we haven't rolled this short put
option strike price up or down
we've always sold the same 30 strike
price put option
if at t went in the money and the stock
was trading for less than our short 30
strike price then we just rolled the
position out in time as a matter of fact
as you can see here on the chart
at t has predominantly been trading
under our short 30 dollar strike price
for almost this entire year
now it has spiked up to right at 31.5
so we'll have to wait and see if it
comes back down to fill that gap but
again this is another low price stock
and if you have a small account you can
trade options in well how much could you
have made over the past
year by selling put options in a t at
thirty dollars per share
let me show you now the account that
i've been trading this position in is my
main
larger option trading account however
let's just say that you've been able to
get together about three thousand
dollars
you're looking to find a way to
consistently generate some cash flow
using options
how much would you have made over the
past year in options with att here you
see every put
option that we sold since june 3rd of
last year at the far right column that's
colored yellow you see the net cash flow
from each one of those positions
at the very top the very first line that
we sold the third friday of july 30
put option for 88 cents per share the
next column to the right of that labeled
cost to buy
we ended up buying it back on july 17
for four cents per share
so the net before commission we pocketed
was 84 cents per share now if you look
at the net per line for the 10 times we
have traded these put options
in all we have pocketed six dollars and
27 cents
per share by rolling these put options
as of yet
none of our put options have been
assigned to us so we just have to keep
rolling them
out in time i'm definitely not opposed
to these options being assigned to us
but just so happens that our limit
orders have been filled that we have
sitting out there in the market close to
expiration
so in all we've collected 6.27 per share
on a 30
stock one of those 10 trades that we did
back on march 18th
was just adding to its current short
april put option position
but as you can see you can make awesome
returns and cash flow
by selling options on a lower dollar
stock i want to give you one more
example of a trade
you can do in a small account this trade
if you want to do it without using any
kind of margin or leverage
you would only need to have two thousand
two hundred dollars to sell one put
option contract this is also position
that we are in
right now here's the information on the
stock and the trade that we did
enterprise products partners ticker
symbol epd
is a very large master limited
partnership that transport and processes
natural gas
crude oil refined products and
petrochemicals
it pays a very respectable dividend
which is currently at seven point eight
two percent per year as you can see in
the blue box so this company does get
assigned to us as a result of selling
put options we'd immediately begin
selling covered calls against it
and collecting that almost eight percent
dividend as you can see here on april
7th we sold to open the may 21st
22 put options for that as you can see
in the blue box we received
65 cents per share it's a position that
we will be in for a little bit longer
than normal because as you can see
if we stay in this position until
expiration we have been in it for about
six weeks
however by receiving 65 cents per share
up front
we've locked in a 24.5
annualized non-leveraged cash on cash
return as i mentioned just a moment ago
we're actually still in this position
now again this is the position that
we've been trading in
our large option trading account so
we're currently short six
of the may 22 dollar put option
contracts however if you only had 2
200 you didn't want to use marginal
leverage then you could just do one
contract you would have received right
at 65
per contract up front when you made this
trade as you can see in the red box
you'd be up in this position
because the current market price of
these options is a little over 26 cents
per share as of right now we were up 39
cents
per share with about four weeks left to
go on this contract having a smaller
account
does not prevent you from selling put
options and then if those puts are
assigned to you
you can always turn the long stock into
a covered call option position
it may limit the number of stocks you
can choose from but as you can see here
when i store the 250 so stocks that we
actively track for opportunities
there's a pretty decent list of stocks
you could potentially trade in
that are under 50 per share and strike
price any of these stocks are ones at
the right strike prices
in the right conditions i'd be willing
to sell put options in them or do
covered call options on them
and then if those put options were
assigned to us the stock was put into
our account
then i'd definitely begin selling
covered call options against the
position
as well as collecting the dividend if
it's a dividend paying stock don't let a
small
account prevent you from trading options
if option trading is something that you
think
fits your personality and trading style
learn as much as you can about it and
then begin making
safe well thought out and understood
trades
if you'd like to receive an alert as
soon as we make trades similar to the
trades that i talked about in this video
consider the benefits of becoming a
patron at the link in the description
below if you'd like to see more details
on how to trade put and cover call
options in a small trading account
check out the video in the link above in
the description below entitled
how to trade options using a small
trading account
in that video i talked through three of
my favorite techniques that you can use
to turn a small trading account into a
large one
until next time happy investing and
we'll see you again soon