We have recently interviewed a client to find out her experience with iInvest and also the market.
Kate M. (name changed for privacy) came to us looking to boost her returns on the $200k of cash she had in her bank account. She owned shares before, so understood the basics of the share market and risks involved.
After speaking with our Master Stockbroker, Haydn Froggatt. It was suggested that Kate look at using the options market to build returns and to help buy some blue-chip stocks at below current values.
The strategy we set up for Kate was selling put options over two blue chip stocks that we felt were undervalued. And would offer a good return via both dividend and capital growth over the next three to five years. By selling puts, Kate was taking on the risk that she could be forced to buy shares at the agreed price at any time. This is why we spend time making sure the stocks we sell options over, are the stocks we are happy to buy and that the strike price of the options contract is a good level to purchase at.
Since opening an account in October, we have sold monthly options over BHP and NAB earning a total of $9,500. Without having to purchase the underlying stocks. So, for the last three months, the return has been 4.75%. Which compared to the average yearly return in the market of 4%, looks very good.
When setting up this strategy for Kate, we took into account that she only had $200k. So we made sure if she was exercised on any of the contracts, she had the funds available to purchase the stock.
This meant her risk was fully covered.
In speaking to Kate, she said she was thrilled with how the strategy had been working and was very keen to continue. She added that the returns have been great and have helped her to have a great Christmas with a little more cash to spend on gifts.
If you would like to learn more about how the iInvest team can help you to boost your returns, please contact us today on 07 5520 8788 to get in touch with a broker.
Learn more about Options Trading: ASX Understanding Options Booklet
Learn more about Haydn: Master Stockbroker – Haydn Froggatt
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