Instant Weekly Paycheck Winners

By Michael Shulman

Weekly Paycheck Training

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INSTANT WEEKLY PAYCHECK WINNERS

By Michael Shulman

Options Income Blueprint Weekly options are ideal for generating cash income every week. Why? First, they are very, very low risk, an ideal way not just to protect your capital (that is true for an options selling strategy), but also to keep it flexible. Second, you are paying only one commission, when you sell weekly puts or calls with only a few days of exposure, your goal is to have the put or call expire worthless, there is no commission to close the position. Third, there are many names with weekly options where you can get into a position without using all your capital – Ford, General Motors, Verizon, Starbucks, SanDisk, Gilead Sciences, QuestCor, CREE, Bank of America and many more. Fourth, if you like a stock but to own it efficiently would tie up most of your capital, you can sell puts against it every week. And, if own a stock in that account you never trade, you can sell weekly calls against those core assets and increase the real amount of capital you are using to create that extra paycheck I like selling weekly options as part of any income strategy because as you can clearly see risks are minimized in a weekly options income strategy.

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And this strategy, using simple tools, simple positions, can be repeated every week, over and over again exploiting one or a handful of ideas to put cash in your pocket. So what looks good right now? On the following pages are some of my best instant weekly paycheck winners for trading weekly options.

iWORLD

iWorld is the term I use to discuss the radical transformation personalization and the demand for increasingly personalized products is re-shaping entire sectors of the economy.

What exactly do I mean by personalization? The trend is seen and has a different impact in different sectors. But their basics are easy to grasps for we are all consumers:

• Quality – quality products, quality brand • Selection – a very wide selection of choices to meet a wide variety of

personal needs • Price – within a wide selection and within defined quality standards, a

wide range of price points • Customization – core products and services can be customized • Mobility – in certain sectors, mobile use of the product is very

important.

As you read you will see that combining these factors creates an ability to charge more for a product which in turn supports producing quality products and expansion of the brand as more margin means more capacity to expand. This creates the following metrics that are directly driven by the expanding size of the customer base demanding personalization.

• Market saturation – how close is the company to market saturation? • Market share – is the company gaining or losing market share? • Margins – are margins expanding or shrinking?

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It is all about margins – personalized products command higher prices, which in turn command higher margins which means more money to spend to expand the brand or to simply state as earnings, driving up stock prices.

The two sectors to look at are technology and food.

Technology: The iPhone and iPad – the smart phone and the tablet – are the quintessential examples of personalization. A smart phone or tablet can now function as your phone, GPS, movie player, book reader, broker screen, word processor and so on. With a zillion apps the devices become completely personal. Smart Phones and tablets have destroyed the netbook market, are beginning to whack the laptop market and have badly hurt the personal computer market not just because of the ability to customize them to your will but because of their mobility and foot print. That size and mobility is what more and more consumers want from their computing devices. Who are the winners?

Three obvious ones – Apple (AAPL), SanDisk (SNDK) and Qualcomm (QCOM), the latter being the dominant provider of telecom chips. Also take a look at Corning (GLW); they make a lot of glass that goes into smart phones and tablets. AAPL, SNDK and QCOM all have nice, rich weekly premiums.

And Cree, Inc. (CREE) continues to present us with good premiums and the stock has a chart with the slope in our favor. The company is the world leader in LED technology and uses this to generate revenues through licensing and products.

Food: Personalized food is the customer burrito bowl at Chipotle (CMG); the custom sandwich at Panera (PNRA); finding too many types of quinoa and other grains at Whole Foods Market (WFM) – and in this sector it all began with the decaf Grande skinny vanilla latte and its cousins at Starbucks (SBUX). And let’s not forget Buffalo Wild Wings (BWLD). If

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you multiply their choices in wings, wing sauces, salads, salad dressings and beers you have more than one million possible meals. No kidding. Speaking of beer, the brewing company with the highest margins and the largest set of nationally branded boutique labels is Boston Brewing Company (SAM), the parent of Sam Adams beers. Their margins are above 52%; commodity competitors such as Anheuser Busch Inbev (BUD) and Molson-Coors (TA) have margins around 30%.

While these not all of these food stocks have weekly options, once a month they all become “weeklies” and the premiums are rich enough to make it worth selling puts on these stocks every month.

HEALTHCARE Questcor Pharmaceuticals (QCOR) is one of my favorites for selling weekly and monthly puts, but what does this company do? The company’s primary product is a treatment for radical infantile spasms that would otherwise cripple or kill the child. The product was originally approved for multiple sclerosis (MS) spasms and demand for treating infantile spasms is stable and hugely profitable –

the treatment costs many tens of thousands of dollars.

We first began selling puts when the company was trading around $30. It is now $56 and change.

Another healthcare stock I like is Gilead Sciences (GILD), a company and stock I have followed for more than a decade. GILD is the world leader in HIV treatments and has expanded its core research efforts with acquisitions funded by generous profits and even more generous cash flows. GILD is arguably the best managed pharmaceutical company on the planet. GILD frequently has very rich premiums on both it’s weekly puts and monthly put positions.

Illumina (ILMN) is another of my favorite healthcare companies – it is the world leader, by far, in genomic research equipment and databases that go along with that equipment. I got turned on to the stock at around $11 – it is

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$97 and change now based on merit. And the premiums on the puts are quite high, even for longer term puts.

If you look at a chart on Illumina, $97 is NOT a strong support price for the shares based on volume – but as a longer term put, I am more concerned with the moving averages and the stock broke out based on earnings reported at the end of October. I see the shares running through to the next earnings announcement, January 28th.

THE NEW FRUGAL (Selected Retail) For investors, the New Frugal (my name) is a permanent change in shopping habits. Do I exaggerate? The sale of diamonds on the mass market, that diamonds are forever, give her a diamond wedding ring and so on, was invented during the Great Depression. And diamond prices at the wholesale level were up 35% in the first nine months of 2011.

Investing in the New Frugal is simply a matter of old fashioned stock picking.

Selected Retail: The New Frugal – customers spending less overall and more on quality and name brand items – is hitting selected companies in retailing. Please be aware, 12% of homeowners with a mortgage are not paying their mortgage, pumping $60 billion in to the economy. And unemployment benefits for many have been in place for almost two years. Well, foreclosures continue and long-term unemployment is not going to be renewed – and this will pull an awful lot of cash out of retail.

I love the luxury goods marketplace – especially the luxury names that sell less than luxury items. Yes, you can buy a $35 baby gift at Tiffany’s (TIF) – I bought a baby a shot glass, his parents were somewhat pleased, maybe.

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Anyway, Tiffany’s is doing well, business in Asia is set to rebound, consumers in the US are back to living “the New Frugal” – buying one good item rather than five lousy ones. You can see this at outlet malls – luxury goods providers such as Polo and Kors stores are busy, others are not. Tiffany stores I have visited have a wide mix of customers – and Europeans and Asians are back to spending and I believe this will be reflected in Wall Street’s attitude towards the stock.

Tiffany’s stock has hit a bit of a wall lately but the premiums are very large given the low level of market volatility.

This is a simple story – Macy's (M) recently beat on earnings and revenues, distancing itself from other retailers, led by women’s clothing. When this was announced last week, the stock gap opened and has stayed above $50 long enough to believe it will stay there for a while and over time will begin to climb. The store is a great combination of quality and selection and is set up well for a strong holiday season, which begins, sadly, on Thanksgiving.

Dollar General (DG): DG is a different kind of “new frugal” but this company has exploited the recession as no other and is the new Wal-Mart for cash strapped shoppers. People out of work or living paycheck to paycheck no longer make big trips to Wal-Mart – they have lost their credit cards or lack the cash – and shop week to week at Dollar General, which now sells a lot of groceries and products that cost far more than a dollar. It moves around but you can still get nice premiums every month.

AUTOMAKERS The market is rewarding stocks with real growth, such as the automakers. That is not a joke. I was recently out at the GM Flit Michigan Assembly plant where they put together pickup trucks and they are running three shifts and maxed out of capacity. You can collect nice premium from both General Motors (GM) and Ford (F) weekly’s these days. I am biased towards GM (I have been driving Chevys – Tahoe,

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Suburban, Blazer, Blazer, Tahoe and now a Traverse – seemingly forever). GM trades for around $38 and has very fat premiums on the weekly options.

THE OIL PATCH And, finally take home an extra pay day from the oil patch with little risk. Think simple, think (relatively low risk), think large premiums. One is Chevron (CVX). The stock is around $123 and you can sell a weekly in-the-money put and still collect a little over $1.00 a share…pocketing .04% or 20% annualized. The

refiners are picking up led by Tesoro (TSO). I have been by their refinery in Washington state but the real story is in North Dakota, where very light, sweet crude is being processed by TSO’s refinery – and the refined products have higher margins due to the proximity of the refinery to the shale fields. The stock took a hit due to the temporary closure of a pipeline that spilled about 20,000 barrels of oil – and has moved back up since the pipeline re-opened on November 1st.

Other names with weekly options in this space include ConocoPhillips (COP) and in one of my favorites, Transocean (RIG).

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About Michael Shulman Michael Shulman is an author, writer, newsletter advisor and expert on financial trends and developments. He has been on the leading edge of any industry he has touched since he worked for a firm helping to prepare President Carter’s National Energy Plan while he was finishing his senior year at Georgetown University majoring in Philosophy. Since that time, he has been an

executive an entrepreneur in the computer, Internet and financial publishing industries. Mr. Shulman made his first option trade in 1985 – COMPAQ Computer calls – a position that expired worthless. His second trade broke even; the third brought him a year’s salary, a near twenty to one return on his investment. He has never looked back. He entered the financial publishing business formally in 2001 as director of research for ChangeWave Research’s institutional research business and as the writer and editor of Hedge Fund Investing. He followed these positions with the creation of ChangeWave Biotech Investor and Michael Shulman’s Short Side Trader and Made in America. Each service was based on ideas and approaches different than the conventional wisdom on Wall Street, the institutional service on survey based expert opinion, the biotech letter on business models and performance, not science, and the short side trader on contrarian thinking considerably outside the box. Options Income Blue Print introduces subscribers to a low risk, high yield options trading strategy not found in other services. This strategy was developed from the ground up in Mr. Shulman’s own accounts, his goal to develop a strategy that cannot be replicated by institutional investors of any size and therefore independent of fads and trends that change too often to provide a consistent approach for individual traders. In addition to his advisory services, Mr. Shulman is a prolific writer and the author of Sell Short -- John Wiley, 2009, and many articles appearing in everything from the Los Angeles Times to investment blogs, including his own, NewNotNormal.com and on SeekingAlpha.com. Mr. Shulman has appeared many times on Fox Business and CNBC, is a regular at Money Shows and does other speaking engagements for investors and traders. He is married and has twin sons who never fail to let him know how wrong he is about most things – except trading.

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