Anthony Speciale Stock Market Analyst

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This gun control option lets you buy at a big discount (Part 2)

Speaker 1 (00:00):

Everyone. John, Denton here again with another interview with my good friend, Tim, Melvin, last time we talked with him, he revealed a key trading opportunity with Smith and Wesson. That’s right. The gun company, Smith and Wesson. Today, he’s going to show you how to buy that stock at an impressive discount, which can really boost your return. And it’s not as complicated as you think it is. So be sure to listen to Tim, because he’s going to show you how to do it. Tim is going to talk with you again, man. How you doing

Speaker 2 (00:25):

Back, Jen of great talking again today and yeah, I’m pretty excited about this. We, we talked yesterday. I love Smith and Wesson stock longterm, I think has tremendous opportunity and it will be an okay buy here at around 25 and change. But with the trade I’m going to talk about today. We’re actually going to give your listeners a chance to buy this stock at 20 bucks, about $5, less than the current stock price. So even more of a bargain opportunity. So what we’re going to do is something called a cash secured put, and yes, it involves options, but please don’t, don’t worry about this. This is a lot easier to do than you might think. Yeah, because you’re going to be talking about some things

Speaker 1 (01:05):

That a lot of people might be a little bit uncomfortable about or not totally understand. So let’s, let’s, let’s lay it out for them so they know exactly what you’re talking about. Okay.

Speaker 2 (01:12):

Let me make sure I get this, you know, so you guys can understand it and actually execute the trade. We’re going to sell a cash secured, put okay. Time,

Speaker 3 (01:26):

My Mike, I I’ll get, I’ll get all the way through that. I promise.

Speaker 2 (01:33):

So, okay. What we’re going to do, John is we’re going to have readers sell. What’s called a cash secured put now, please understand that, you know, from time to time, you’re going to hear about options selling services, and people will talk about margin and how you should just, you can just put up a small amount of the money required for the stock, right? Don’t do that. Okay. Don’t listen to people that tell you to do it. We’re going to sell an option at $22 and 50 cents. That option, when we sell that option, we’re giving the buyer the right to buy that stock from us at 2250 a share between now. I’m sorry. I messed up. We’re right back over. Okay. To start over. Okay. Okay, John, what we’re going to do is call it a cash secured put, and please understand that I want to make this easy laid out. So the trade can actually be done by absolutely

Speaker 1 (02:28):

That’s. That’s what they’re here for. They want to know, Hey, how do I get to this? And how do I make money? Okay, we’re

Speaker 2 (02:33):

Going to sell a cash secured, put on shares of Smith and Wesson. Now it is an options trade, but it’s not as complex as you might think. We’re going to sell a December. That’s when this expires the third Friday in December of this year, $22 and 50 cents put, when we sell that, we are giving the buyer of the, put the right to sell us his stock for 2250. Okay. We’re we’re going to get paid about $2 and 35 cents at today’s price to sell that option. The option is good for 100 shares of stock. So if you want to own a hundred shares of stock, you’re willing to buy that at 2250 minus $2 and 30 cents that you get given you a 20, 20 net cost in sheriffs with Smith and Wesson. I don’t want you to put up exchange minimum margins or the minimum requirement by your broker.

Speaker 2 (03:25):

I want you to put up $2,250 for every hundred shares of stock that you want to own. Don’t do any of that margin stuff way too many people do it. It’s way too risky. You end up getting overconfident. You sell more options than you should only sell as many options as you want to own shares of stock. That’s the key to making the straight work. That makes sense. When we do that, I want you to think about how well this trait is setting up. We’re getting almost 10% in premium to sell this option, okay. For the next four months to, to expiration in December. Now, let’s say that the stock never gets put to us. We never ended up buying it, but we’ve got this block of money sitting there. We’ve gotten almost 10% each time we sold it. So you’re at 27, 20 8% annualized rate of return on this trade for the year. Even if you never buy a single share of stock.

Speaker 1 (04:25):

Well, I mean, that’s sounds like a no brainer right there to me. Why wouldn’t you want to jump on this? It

Speaker 2 (04:31):

Really is. And they don’t line up all the time because most people start with how much can I make selling the option? Massive, massive mistake. That’s the wrong question. Do I really want to own this stock? Do I love this stock? Would I love to buy it lower? If the answer to those questions are yes. Then we go to the options market. Often we find, yeah, I’d love to buy the stock lower, but you know what? There’s no trade. That’s going to allow me to do that on a cost-effective basis. Right? When we get them, we love them and we put them on and we just think it’s the greatest way to buy stock ever. And it can add substantial amounts to your annualized rate of return, but you don’t find them every day. Now, John, one thing I want to warn everybody about this, okay, you’re going to hear about selling puts as a source of income. No, it’s not. Please don’t listen to anybody that tells you that you might want to, you know, kick them somewhere. Interesting. Cause they’re that kind of, so that’s not, that’s not the correct

Speaker 1 (05:33):

Way to look at it, right? That’s what you’re saying. Okay. It’s

Speaker 2 (05:36):

An opportunity to create a stock trade at a lower price on a stock. You really like. Gotcha. Also, if you never get put the stock, you’re going to keep all that premium. So you’re going to make money. Even if the stock never gets exactly to your price. So you’re creating an opportunity, not generating income, right? This trade is such a great trade. You’re going to be ahead of the game by about 10%. If you ended up buying that stock at 2250, you keep the premium. So now it’s 20. So now you’re actually ahead by a full 20% of the guy that just goes out and pays $25 for a stock.

Speaker 1 (06:12):

Yeah. I mean, that’s an impressive gain right there. I mean, no matter how you slice it and the 2250, I mean, you have to be crazy to, to not try this.

Speaker 2 (06:21):

Yeah. Yeah. And it’s, it’s very easy trade to do, right? You want you to tell your broker and you know, again, the broker is going to talk to you about margin and all that. You don’t care about that. Right? Always put up all the cash required, never sell more options than you want to own stock. And this can make a huge difference in the return that you end up getting over time on the money that you’re investing for your retirement or your grandkids college or whatever it is your investing goals are. This trade can get you there a lot quicker, but you gotta be really smart about it. Now we’re going to create Smith and Wesson. We’re gonna have a net cost of 2020. We have growing gun demand. We have fabulous management at this company. That’s committed to buying back stock. They bought back 14% of the company last year with their cashflow and raising the dividend over time. Both of which will help the stock just go higher and higher and higher. And we’re going to buy it at my favorite term, a discounted price.

Speaker 1 (07:17):

There you go. It’s always good to get a discount. Pretty much anything in life,

Speaker 2 (07:21):

Right? Nobody pays. Nobody pays retail anymore. Why

Speaker 4 (07:23):

Should I, when it comes

Speaker 1 (07:25):

To investing in the market, you know, come on, let’s get a discount. Well, Tim, I really appreciate you taking time out of your day again, to talk with me and with our viewers, with my readers. I know a lot of them are going to be kind of nervous about this because it’s a lot of technical talk that a lot of people may not be familiar with, but with their guidance, I know that are going, gonna be able to pull this trade off. It’s not as scary as they think. And that’s kind of our main message here is you take these opportunities, you jump on them and they’re not as difficult as you think they are. If you have the right information to get into them. Right. That’s exactly correct.

Speaker 2 (07:55):

And you know, any, any good broker’s going to walk you through how easy this trade is, and they’re really going to want to be your best friend. When you tell them you’re doing all this on a cash secured

Speaker 4 (08:03):

Basis, got all the money

Speaker 2 (08:06):

There by reducing substantially the amount of risk being taken. Absolutely.

Speaker 1 (08:10):

They love to hear cash whenever you’re talking about, I’ve got the cash. Just show me how to do this. Right. Cool. Well, Tim, again, thanks. We’re going to make sure that our readers and our viewers keep an eye on Smith and Wesson, and we’re going to push them to jump into this trade because it just makes sense. Thank you so much for your insight. And I can’t wait to talk to you about our next video that’s coming soon, right? Absolutely.

Speaker 2 (08:31):

Looking forward to it. We’re going to talk about whether or not you should buy an index fund and the answer is going to surprise

Speaker 1 (08:36):

You. I, I, I’m willing to be surprised because I want to learn more about this because index fund seemed to be really popular, especially with people just getting into the market. So they really are absolutely cool. Well, Tim, again, thank you. Really do appreciate it. Okay. Thanks a lot. We’ll talk again. Awesome, everybody again. This is John Ditton. Thank you for joining me and my friend, Tim. Be sure to check out our, all of our videos. Tim’s got some awesome insights. He’s got some, some watch lists, important information that you need to really grow your account and make money and make sure you watch us for our next video on ETFs. I think the information that you’re gonna get may surprise you. This has been John. Didn’t talk to you again soon.