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What to do in a Rising MarketHello, Now here’s an interesting conundrum… You have two choices… To make money or to make money. No matter what way you look at it the rising market is ideal for most share investments and the Magic Moo Cow is no exception. They say that a rising tide floats all ships and this is certainly true of the milking your share cows for cash. Strangely enough people find this difficult to deal with. It took me years to figure out what their fear was, but more on that in a second… Think about this. If you were rich you probably wouldn’t have many lazy assets. Sure you might have a boat or two, or an island tucked away somewhere (don’t believe the hype you’d be crazy to want to own an island – I know!)… But in general you’d want to put all your assets to work right? Just like if you owned a factory and you walked in and all your machines were sitting idle. You’d want to know why and you’d want to put those machines back to work a.s.a.p. But most people have an even bigger lazy asset that’s just sitting there sucking up future potential, sub-optimising wealth creation and costing real opportunity – your share portfolio (even if it’s just in superannuation almost everybody now owns shares in Australia). And if you’re not putting that share portfolio to work earning cold hard cash you’re missing outThe Magic Moo Cow (buy-write) puts your share portfolio to work. Instead of sitting there idle your shares start producing. Month in, month out, generating cash flow for you – increasing yield and decreasing risk – quite an achievement really. And that’s the secret of wealth creation – building an asset base and putting it to work, so one day, you don’t have to. And the Magic Moo Cow is very versatile – if you want straight income just pocket the cash month in month out to do what you wish, if you want capital growth reinvest the premium back into buying more cows (shares) to keep milking for profit and if you want tax effective yield don’t write calls in dividend months and pick up not only the dividends but also the franking credits to help with your tax. Every month you buy blue chip shares – usually from the top 20 Australian companies, and offer to sell those shares at a higher price than your purchase price in return for a payment (called a premium). That payment can be, on average up to 3% per month. During the peak volatility of the market 5%, 6% and even 7% were not unusual. During normal times 1% to 2% net of all costs is quite normal. So if you have $10,000 invested that would mean a payment to you of about $100 to $200 per month – valuable cash flow, paid directly into your bank account. Magic! If the market goes up above the agreed sale price and stays there you sell your share (usually at the end of the month) and because the sale price was above your purchase price you make an addition profit. More magic! Even if the market is falling the payments you are getting (in premium) are going towards keeping you in front. So if the market falls 1% and you’ve made 2% you’re still in front. If the market falls 3% and you’ve made 2% you are behind (that month) but much better off than other investors who just held the share, and it’s easy to forget, over an extended period of time, falls of 3% in a Top 20 share are pretty rare. Even more magic! And if that’s not enough… There are, essentially, only three major risks:
So what do you do if the market takes off?Sit back and smile? That’s the easy answer and like everything about this simple strategy it’s the right one. There are a couple of things you can do. You can buy back your written option. Remember you are agreeing to put your share up for sale at an agreed price in return for a payment. This payment is made to you by a speculator hoping the shares will rise in value more than the agreed buy price. You are selling them the option to buy your shares. If they do, they buy the share from you (remember this will be at a profit) and sell them back into the market. If the shares don’t go up (and stay up) above the agreed sell price they lose but you get to keep the payment regardless. And conversely if you want out you simply do the opposite of selling, you buy your option back. This is a simple market transaction and is always an available choice for you. It may cost more to do this than your original premium payment but you get to keep the shares. You can roll your option up. This is effectively changing the agreed selling price through buying back the first option and selling another option at a higher agreed selling price. This has the advantage of costing less than just buying the option back but still means that if the share price keeps rising, you may have to sell. You can roll your option out. In option trading time quite literally is money. Generally the longer the option has to expiry the more it is worth. The way I teach the strategy we write options monthly but you can also do it two or three monthly as well. That way you buy back your option for this month and write another for next month. This has the advantage of potentially producing additional income but again you still may have to sell your shares. Or you can simply do nothing! That’s right you don’t have to do anything at all. Remember if you carry out the strategy the way I teach it you will have agreed to sell your shares at a higher price than you bought them for. This is what professionals call a profit! Heck everybody calls it a profit – when you buy low and sell high. And, 9 times out of 10, that’s what I do – simply allow my shares to be sold, pocket the profit and use that additional capital to buy more lovely cows (shares) to keep on milking. So why does everybody insist on making it more complicated than it needs to be?Remember I told you earlier that this took me years to figure out? Call me stupid but I just didn’t get it. People would ring me up worried that they would have to sell. I’d just say to them your choice is simple, you’ve already made a profit (this is a good thing) by selling the option, now you are going to make even more of a profit by selling the share (more profit – even better!) but people still reacted negatively. It had me shaking my head. To me it was simple – the choice of making a profit or making a bigger profit – seemed like a no brainer. But then I realised the silly billys were getting attached to their shares – like they were precious heirlooms that would be melted down and flogged off. They had it fixed in their head that they should never sell and you know, if you were doing a buy and hold strategy that’d be a pretty smart way to think but this strategy is all about the milk and not about the cow. Dairy farmers of course love their cows and look after them. But if the right offer came along they would have no hesitation in selling them. Dairy farming is all about the milk and not about the cow in exactly the same way that the Magic Moo Cow is all about the cash premium and not about the shares. So if the market is moving and moving up (halleluiah!) simply take the profits as they are delivered to you. Either through premium, the sale of the share or both. Nobody ever went broke making a profit! Magic Moo Cow made EasySo how do you learn more about this simple, easy, effective and popular strategy? Well we’ve gone to considerable lengths to make it easy for you… 1. Download my free eBook – go to www.MagicMooCow.com.au/ebook-order-form “The Story of the Amazing Magic Moo Cows and their Golden Milk - increase return, decrease risk, generate regular income and produce higher profits from your investing” reveals how you can immediately start earning cash flow. It starts with an easy-to-understand parable and then goes on to detail the strategy in plain-English. There’s no obligation to go any further. We make it free to you as a thank you for checking out this website. You’ll discover:
2. Come to the Cash Cow seminar In 3 hours get all the essential information you need to discover if the Magic Moo Cow is for you and get started. Tickets are just $47. This event will be held in 10 cities around Australia starting this March. Book online or call 1800 878 878. 3. Decide “Do It Yourself” or have it done for you. Late last year we launched two exceptionally valuable resources. The Magic Moo Cow game and forum for those who want to do it yourself and learn the strategy from the inside out with other traders who are out there getting results, with real market prices but no risk. For those too busy to learn or who want experts looking after their portfolio we have available the Managed Options Opportunities (MOO) fund. Easy, simple, low risk, potentially high return.Take action to learn more today. Who knows, in just a few months time the regular cash from the Magic Moo Cow might just be yours. Cheers, Peter Spann. Did you miss The Magic Moo Cow – Lesson 1? Read it here.
IMPORTANT INFORMATION |
Magic Moo Cow – Lesson 2:
