PROTECT YOUR PRINCIPLE PLUS PROFITS STRATEGY
Feel caught between protecting your nest egg and wishing for higher returns than the bank yields?
By using the "Protect Your Principle Strategy", you can achieve both.
Example based on $100,000.
Step 1:US Treasury Note (T-Note) is purchased for around $82,500 with a maturity date seven years away, at 3.0% interest.
(T-Notes sell in $100 increments.)
The US Government makes interest payments every 6 months. The total with interest after 7 years is approximately $100,000.
The T-Note guarantees the original $100,000 principal.
You can purchase US Treasurys directly from the US Government with no commission cost: US Government: Treasury Direct
Step 2: We take the remainder of $17,500 and trade it using the Conservative Portfolio options trades.
We keep 10% of the options trading money in cash to fulfill the broker's Cash Reserve requirement.
We estimate a 1.0% return each month on the Options amount.
Our trades will target a 2.0% monthly return, but we may not always be able to place trades, the volatility can change, and we may have to exit some positions for a small loss. Half of our targeted return is a reasonable working number for these calculations.
By reinvesting the 1.0% monthly return, continuously over the seven years, we should end up approximately with $39,700 in the options account (assuming no major losses - major losses are still possible, even with the conservative nature of our trades).
At the end of the seven years, the results look like this:
US T-Note with Interest: $100,000
Profits from Options trades: $39,700
Total Estimated Return: $139,700
Compare this to taking that same $100,000 and putting it into CDs yielding 3.00% compounded interest. Over the same seven years, that $100,000 will generate $123,335. So, which path looks better to you?
CDs invested at 3.00%: $123,335
Uncle Bob's Money "Protect Your Principle Strategy": $139,700
Using Options in this example, you can almost double your return with no risk to your original principle.
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What is the smallest amount that I could invest with this strategy?
The minimum investment amount at a 3.0% interest rate is $3,150:
--> $2,600 invested in a 7 year US T-Note at 3.0% Interest will equal approximately $3,150 (this is your principle protection)
--> $550 goes to options: $50 for the cash reserve, and the Profits from making $500 maintenance Option spread trades: $1,155
Total Estimated Return: $3,755
Have a Question? Comment? Suggestion?