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Mortgage-Debt Fix

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Real Estate Connect Center

Tackle Trading

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3 Ways to Buy Real Estate with No Cash or Credit

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Advice to a Young Tradesman from an Old One

By Benjamin Franklin

Click here to download PDF.

In my book, I referenced this published letter by Benjamin Franklin as having been where the phrase “Time is Money” came from.

Little do people know that Benjamin Franklin immediately followed up by saying “Credit is also money”.

Click here to download PDF.

What is a “Covered Call” Strategy?

By Coach Roel

A “covered call” is an options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset in an attempt to generate increased income from the asset. This is often employed when an investor has a short-term neutral view on the asset and for this reason hold the asset long and simultaneously have a short position via the option to generate income from the option premium.

This is also known as a “buy-write”.


BREAKING DOWN ‘Covered Call’

For example, let’s say that you own shares of the TSJ Sports Conglomerate and like its long-term prospects as well as its share price but feel in the shorter term the stock will likely trade relatively flat, perhaps within a few dollars of its current price of, say, $25. If you sell a call option on TSJ for $26, you earn the premium from the option sale but cap your upside. One of three scenarios is going to play out:

  1. a) TSJ shares trade flat (below the $26 strike price) – the option will expire worthless and you keep the premium from the option. In this case, by using the buy-write strategy you have successfully outperformed the stock.
  2. b) TSJ shares fall – the option expires worthless, you keep the premium, and again you outperform the stock.
  3. c) TSJ shares rise above $26 – the option is exercised, and your upside is capped at $26, plus the option premium. In this case, if the stock price goes higher than $26, plus the premium, your buy-write strategy has underperformed the TSJ shares.

To know more about covered calls and how to use them, read The Basics Of Covered Calls and Cut Down Option Risk With Covered Calls.


What is an “Option Contract”?

By Coach Roel

An “option contract”, more commonly referred to as simply an “option”, is a financial derivative that represents a contract sold by one party (option writer) to another party (option holder). The contract offers the buyer the right, but not the obligation, to buy (call) or sell (put) a security or other financial asset at an agreed-upon price (the strike price) during a certain period of time or on a specific date (exercise date).

Call options give the option to buy at certain price, so the buyer would want the stock to go up.

Put options give the option to sell at a certain price, so the buyer would want the stock to go down.