How You Can Get Paid Thousands to Not Own Stocks
The market finally got its long-awaited correction as the S&P 500 plummeted 11% in just four days. Global growth concerns and currency wars sent shockwaves throughout the world’s marketplaces, sparing almost nothing.
Even before the recent market crash, this has been one of the toughest markets in years for stockholders. But despite the struggles in the global markets, there are always stocks that can buck the downward trend. One such company is in a sector that’s been hit the hardest in the past year: energy.
What’s more, my readers and I have made more than $1,910 without owning a single share of this company. (And I’ll explain exactly how in a moment.)
The energy sector has fallen 20% year to date — making it the worst-performing sector. But like I mentioned above, there are always some resilient stocks that continue to rise.
For example, there’s an oil refiner that operates six refineries in the western United States with a combined capacity of approximately 850,000 barrels per day. The company also owns and operates a network of approximately 3,500 miles of pipelines, as well as a handful of natural gas processing complexes, and its retail operations include over 2,200 gas stations.
And while the energy sector has tumbled, this stock is up more than 20% year to date, even with the recent market correction.
But what sets this company apart from many other energy firms is its integrated business model, which means it makes money at nearly every step of the process. Other companies pay this firm to transport oil and natural gas from the oil fields to the refineries through its extensive pipeline system. It then gets to sell the refined products to consumers at its gas stations. This is what has helped it remain a market leader despite being in a lagging sector.
The company I’m talking about is Tesoro Corporation (NYSE: TSO).
I first identified this stock as a market leader to readers of my premium advisory, Income Trader, in March 2013. That’s when we made our first income trade on the oil refiner. Since then, we’ve generated instant income from Tesoro five more times. Recently, we had our seventh opportunity, and my readers pocketed another $230 to bring our total $2,140 — all without ever purchasing a single share.
We’ve essentially been paid to never actually own this stock.
This strategy isn’t for everyone… but if you’re interested in generating income, then it’s for you.
What I do is find a company with great fundamentals and a great business model. Basically, it is a company I wouldn’t mind owning — for the right price.
I set a price at which I’m willing to purchase this company, usually at a good discount to where it’s currently trading. After all, who doesn’t like buying things on sale?
Then I go into the often misunderstood derivatives market. Now, I understand this word typically has a negative connotation, but don’t let that scare you away. The derivatives market that I participate in doesn’t involve complicated mortgage swaps or collateralized debt obligations (the kind of financial instruments credited with contributing to the financial crisis).
I then find someone in the derivatives market that’s willing to sell me shares of the company I want — in this case Tesoro — at the price I’m willing to buy it at. Once I find that person, we make a deal. Keep in mind, this deal is all done through my brokerage account, so I don’t actually have to go out looking for someone. My brokerage account facilitates the entire arrangement.
The deal typically goes something like this. First, I set my price. In Tesoro’s case, I was willing to purchase shares at $85 — a 20% discount where it was trading at the time. Like most deals, there’s an expiration date to my arrangement. In this case, my offer is good until Sept. 18 — about 44 days from when I made the offer.
In return, the seller pays me cash to seal the deal. Think of it like an earnest payment.
So to reiterate the deal so far: I’ve made an offer to buy shares of Tesoro at $85 — a 20% discount at the time — and in return I’ve received a cash payment.
You may be asking yourself why anyone would pay me to buy their shares at a discount. It’s for the same reason we pay for auto or home insurance: Just in case.
In this case, I am acting as the insurance company. Although I wouldn’t mind owning Tesoro at $85 a share, I don’t think the stock will fall that far before Sept. 18, so I’ll take on that risk to collect an upfront premium. Indeed, even at the height of the panic selling on Monday, shares held above $86 before rebounding.
If TSO does fall below $85 at expiration, I’ll get to own a market-leading company with solid fundamentals at the price I was willing to pay (as opposed to a busted up vehicle or burnt down house like an insurance company gets), plus I get to keep the cash I collected.
If the stock doesn’t fall to my offer price, I simply keep my payment and move on.
So far, my readers and I have made this type of deal on Tesoro seven times. Had you offered to buy 500 shares of Tesoro on each contract, you would have pocketed $2,140, including this most recent trade. Had you offered to buy 1,000 shares each time, your cash payment would have increased to a total of $4,280.
It’s as simple as that. And we make this trade on numerous stocks, not just Tesoro, making hundreds if not thousands of dollars with each deal we make. So far, my track record is pretty remarkable — I’ve closed over 100 winning trades.
Like I mentioned before, we use the derivatives market to transact these deals, and hundreds of thousands of these sorts of transactions happen every single day. But don’t let that scare you away from possibly raking in hundreds or even thousands of dollars, often without actually buying shares of any stock.
I’ve put together an eight-minute tutorial that will teach you everything you need to know to begin taking advantage of these sorts of deals. You can watch the training video here.