Ok. So now let’s say we a situation where the stock price has gone up to $20.70 and is above the rental price of $20.50.
If this is the case at the end of the rental period, then we will be forced to SELL our 200 stocks at $20.50 instead of $20.70. But that’s ok. In fact, it’s what we want to happen. Don’t forget we still have the premium from when we placed the trade.

We also bought the stock for $19.97 and if we have just sold them for $20.50, then we have made a 53c profit, plus the price of our original premium.
That’s 200 stocks x 53c = $106
Plus
Rental premium of $240
Total profit for 4 weeks equals $346

That equates to a return of 8.7% for the month.

Of course, we now don’t have any stock left, so we simply start again from scratch by purchasing some more stock (either the same company or different) and renting them out again.

In the next post, we’ll have a look at what happens, if the stock price goes down. It’s no-where near as bad as what you might think.

Until then,

Stuart Ginbey

www.planetwealth.co.uk