Our First Put Sell Pays Off Early With Kirkland Lake Gold
Less than a month ago, I introduced put selling to War Room members. In The War Room, we’re all about using every strategy in the book to make money.
After a survey, we found that many members love to sell puts…
However, some members don’t, and that’s okay too, as we have plays for every level of investor comfort.
Put selling is an advanced strategy used by investors like Warren Buffett. These investors use put selling to buy stocks they really want to own at discounts to the market price. Others use put selling to rack up income and trading profits.
The goal with put selling in The War Room is to trade for profits and generate quick income. But the cardinal rule for put sellers is to not sell a put on a stock they are not comfortable owning… at the right price.
Let me walk you through our Kirkland Lake Gold (NYSE: KL) play to show you what I mean.
At the time of the recommendation, Kirkland Lake Gold was trading for around $45. This company is a top-tier gold producer with great profitability and cash flow. But gold is a finicky metal, and the price of gold stocks is directly correlated to gold prices.
So this play was for those who were interested in adding a great gold stock to their portfolio at the right price, or making a great return for trying to do so.
I chose the January 2021 $25 puts. Keep in mind that the strike was 44% below the stock price at the time of the recommendation. That’s a huge discount and a massive cushion in case of a drop. While the expiration date was more than year out, our expectation was to close well before the expiration.
Two weeks after the play, Kirkland Lake Gold reported stronger earnings and a dividend raise. While the price of gold stayed stable, the price of Kirkland Lake Gold began to rise.
I recommended members sell their puts for $1.05, and this week they bought those same puts back for $0.75. Members covered their sell for a 25% to 30% return of potential profits in less than a month with more than 14 months to go before expiration!
At the time members covered, the discount between the puts’ market price and their potential cost had grown to more than 50%…
So why did members cover so early?
Well, we are traders in The War Room, and when we see gains of more than 25% staring us in the face after just a couple of weeks, we take them! Why wait for another 14 months and take on extra time risk when we have a big winner in the bag already?
Action Plan: We have two more put sells in the portfolio right now and expect large gains to come from them!
Join me in The War Room for the next “big discount” put sell or the many other strategies that pile on the profits day after day!
About Karim Rahemtulla
With more than 20 years of experience, Karim has mastered the subtle art of options trading. What we admire about him is his ability to score huge gains while minimizing the massive amount of risk that often comes with options. Beyond his expertise in options trading, he is also the author of the best-selling book Where in the World Should I Invest? He publishes weekly about smart speculation in his latest free e-letter, Trade of the Day.