I love teaching…

I spend most of my time educating readers about health, wealth, and how to live a better retirement.

So when it comes to my newest way of trading, I’ve thought hard about the best way to teach it. And the best way I know is to walk you through a hypothetical trade.

This strategy uses options. But don’t let that intimidate you. Anyone can learn it. For now, think of this as a first look so you can get a sense of the process – and see the huge potential benefits.

Sit back… follow the steps… and I’ll show you firsthand how a simple technique can return 96% in less than a month.

Let’s get started…

First, you should know my new method takes the trades from Stansberry Research analysts like myself, Steve Sjuggerud, and Porter Stansberry, and then shows you how to potentially “boost” your gains up to triple-digit returns.

So the trade I’m about to describe is not an actual trade recommendation. I don’t want to give away one of the recommendations we’ve made in our paid products.

Instead, we’ll walk through a trade on spice giant McCormick (MKC) as a teaching tool, using modeled prices that should come close to what you can see in your brokerage account…

McCormick is the kind of stock you can buy and hold forever. The company consistently churns out high revenues and profits year after year. And it always manages to increase its annual dividend payment… as it’s done for more than 30 years.

Typically, its share price is not volatile… With the exception of some surprise moves recently, it usually trades within a narrow range throughout the year. Over the last couple months, it has stayed between $150 and $160 per share.

That makes it a prime candidate for one of the two main trading strategies we use, called a “calendar spread.” A calendar spread makes money from the passage of time, so we want to use it on stocks that don’t have wild price swings.

Shares of McCormick are trading around $155 as I write. For this trade, we’d want to make a bet that shares continue to hang around $155 by July 19. Basically, the bet is that the stock won’t move much.

What we’ll do is sell an option that expires in July and buy another option that expires in September. Both options have the same “strike price” of $155. (That’s the price at which a trader can exercise an option… and the price where we’re betting McCormick shares will end up.)

It will cost us only $255 to make this trade, at recent option prices. That $255 is the most you can lose, no matter what happens to McCormick . That’s one reason many folks like this type of trading… you’ll always know exactly how much you have at risk.

After you make the trade, you sit back, relax, let time do its work, and check back in on this trade in a couple weeks.

Let’s fast-forward to July 19… And let’s imagine that McCormick has barely moved. It’s now at $153.50, down $1.50.

But when we check on the price of our trade or “spread,” it’s now worth about $500. The stock price fell by $1.50… And our spread shot up 96%!

Why the huge difference? Without giving away our secret sauce, we take advantage of time. We know that the July expiring option we sold will lose its value faster than the September expiring option we bought.

This phenomenon is known as an option’s “time decay.” Shorter-dated options lose value faster than longer-dated options. That’s why a calendar spread is one of the most profitable trading strategies you’ll ever find.

Getting back to our McCormick trade, we can see how this works… The July option we sold will be worth $0 by the July expiration date. That’s because McCormick shares are trading below the strike price and there’s no time value left in the option.

Meanwhile, the other September option hasn’t lost all its value. There’s still a chance for the stock to move by September, so it’s still worth quite a bit (again, our model estimates it will be worth $500 when we fast-forward as far as July – if McCormick’s stock doesn’t move much).

We would close the trade in July. And the $255 we put up initially turned into $500… for a 96% return. All in less than 30 days. On a stock that barely moved.

I don’t want you to put on this trade today. But I do hope that this example gives you an idea of the power of our specialized option trades.

Imagine a stock that never moves. You can make 50%-100% consistently every 30 days, and that $255 you put up can turn into $2,000 or more after one year. All because we’re taking advantage of the strange way options lose their value!

This kind of trading is fun. It only takes a small amount of money to make these bets, and the upside potential is outstanding.

You’ve seen how simple it can be. I encourage you to add this strategy to your “trader’s toolbox” today.

Here’s to our health, wealth, and a great retirement,

Dr. David Eifrig

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Source: Daily Wealth