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Marc Lichtenfeld’s Penny Options Primer

June 24, 2022

Hi. Marc Lichtenfeld here... Chief Income Strategist for The Oxford Club.

If you’re interested in increasing your wealth with almost none of the HARD work and without having to put a lot of money at risk, you’re in the right place.

Some people are already making a lot of money from a unique trade that allows anyone to control shares of some of the world’s most recognizable companies for pennies on the dollar.

Jim C. invested $775 in one of these trades...

And turned it into $10,500 in 10 months.

Matt H. invested, we estimate, a little under $16,000 in the same trade...

And turned it into $141,000.

Anthony V. and his brother invested BIG in the very same trade...

And they were able to pull in more than $1 million for their family.

It was $1.3 million, to be exact – a 907% official gain – in less than a year’s time.

They took their entire family, grandkids included, to Sicily on a dream vacation to celebrate that seven-figure win.

This play was in pharmaceutical giant AbbVie (NYSE: ABBV).

At the time, shares were trading for $63.

So to control 100 shares, these folks would have had to invest $6,300.

But here’s the amazing thing...

By using one special kind of investment, they were able to control the same 100 shares for just $118.

That’s like getting a $6,100 discount.

So they were able to put significantly less money at risk...

And still have the chance at making life-changing gains.

That’s the power of a simple investment I call “penny options”...

Because they allow anyone to invest in some of the world’s most recognizable companies at entry prices of $5 or less.

Everything Costs More These Days... Your Chance at Massive Gains Shouldn’t!

In a world where stocks like Google (Nasdaq: GOOGL), Booking Holdings (Nasdaq: BKNG) and even AutoZone (NYSE: AZO) trade for near $2,000 per share...

I believe penny options are one of the most powerful ways to risk less money and maximize your gains.

And it’s not just me saying it.

A famous study conducted jointly by the Swiss Finance Institute, Emory University and University of Texas found that a simple strategy of buying the cheapest call options available would have earned an average of 22% PER MONTH over a nine-year period.

Due to the power of compounding, that comes out to an incredible annualized gain of 987% across the entire portfolio... over nearly nine years.

And for more than 12 years, my penny options recommendations have made up the majority of the 442 winning recommendations across my VIP Trading Services... roughly 36 per year.

And they’ve accounted for more than 60% of my nearly 100 highest triple-digit winning gains.

Unfortunately, many investors are intimidated by options in general. And they shouldn’t be.

That’s why I’ve put together this special “Penny Options Primer” for you...

To take away any misgivings you may have about trading options – especially penny options.

The truth is, options are just as easy to trade as stocks, bonds, cryptocurrencies and every other asset.

So What Is an Option?

In short, it’s a contract. An option gives its holder the right – but not the obligation – to buy or sell 100 shares of stock on a designated date.

Every option is linked to a specific stock. So whenever you place an options trade, its price will be affected by the movement of its underlying stock.

Options come in two standard varieties: calls and puts. And options trade in lots of 100 shares (called contracts).

A call option gives you the right – but not the obligation – to buy 100 shares of a particular underlying stock at a specific price (the exercise price or strike price) before a specified date in the future (the expiration date).

The beauty of a call option is that it tends to go up by a higher percentage than the underlying stock.

Take AbbVie, for example. While the regular shares went up 66% in 10 months...

Our penny options skyrocketed 907%.

That is the incredible difference you can see between buying regular shares and investing in THE RIGHT penny options.

The opposite of a call is a put. A put option conveys the right – but again, not the obligation – to sell 100 shares of a stock at the strike price by the time the put option expires.

All options have expiration dates. It could be a matter of weeks, months or even years. If you don’t exercise your right within that given time, the option expires and is worthless.

With penny options, I like to focus on shorter time periods so my readers have the chance to see quick, short-term profits.

A Toyota Motors (NYSE: TM) penny option I recommended, for example, shot up over 400% in 10 days.

At the same time, regular shares went up only 13.5%.

That definitely doesn’t happen every day, but it really illustrates the high profit potential of these unique investments.

Most options trade on the Chicago Board Options Exchange, American Stock Exchange and, of course, the New York Stock Exchange. Penny options are no different.

There are other options markets, but that isn’t something you need to worry about. When you place a trade with your brokerage firm, it will search the exchanges for the best price.

The important thing for you to understand is that options are traded just like stocks in the sense that they have a symbol and their price fluctuates along with their underlying asset or security.

For example, you could choose to simply buy 500 shares in Company XYZ, which is currently trading for $10 a share.

Excluding commissions (which are increasingly becoming a thing of the past), that would cost you $5,000. However, you might not want to buy 500 shares at the same time, or you might think the price for that is a little too steep.

So rather than buy the stock outright, you can buy options on it – which are significantly cheaper per share. With penny options, we’re talking about entry prices under $5.

As I mentioned, in the case of AbbVie, shares were trading for $63 each... but by using penny options, my readers were able to control the same shares for just $1.18.

This gives you the right to buy or sell those same 500 shares at a certain price at a certain time. The key question you need to ask yourself is whether you think Company XYZ is going to go up or down.

If you think it’s going to rise, you buy calls. If you think it’s headed for a decline, you buy puts.

The majority of my penny options recommendations have been calls. But if I see a big opportunity to bet on a stock going down, I’m happy to recommend puts when appropriate.

Before you place your trade, you need to decide on a strike price (your target price).

Next, you need to pick a time frame for your scenario to play out – the end of which is known as an expiration date. This can be anything from weeks to months to years from the day you bought the option.

Options prices vary depending on their expiration date and the strike price as well as the volatility of the market or industry and company in question. More on options pricing later.

By the way, my readers never have to worry about making all these choices themselves. I always do the footwork on my recommendations for them and send them easy-to-follow instructions.

Anyway, options trade in lots of 100 shares. These lots are known as contracts. When you buy an options contract, be it a call or a put, it gives you the right to buy or sell your 100 shares before a specified date in the future – hopefully when the underlying stock hits your strike price.

When you buy an option, it is as though someone is saying, “I will allow you to buy or sell 100 shares of this company’s stock at a specified price per share at any time between now and the expiration date.”

And it’s further understood that for this right, they expect you to pay a fee.

That fee is called the premium, which will vary considerably depending on the exercise price and time until expiration as well as the stock’s volatility.

How Do Options Work?

With all that in mind, let’s take a look at an option listing and put all this together.

AAPL August 20XX $150 Call

This one is for Apple (Nasdaq: AAPL). This is a monthly option, so it would expire on the third Friday in August.

The number next to the expiration date is the strike price. That’s essentially the price you’re betting on the underlying stock exceeding or falling below.

This is a call option, so we buy it anticipating a rise in share price. So in our example, we think that Apple’s shares will exceed $150 per share. The higher the share price goes over the strike price, the more money we make.

Here’s an example of how an options play works in practice...

Say we want to buy stock in a company trading for $10 per share. This company has great fundamentals and huge sales growth. In short, it’s going places.

We think we can leverage this by buying the company’s call options, which expire in about two months and have a strike price of $12. They’re trading for a premium of $0.50.

That’s the price per share. Remember, an options contract represents 100 shares, so the full entry price of this trade would be $50, or $0.50 multiplied by 100.

And we’re betting that the company’s share price will exceed $12 two months from now. To break even on this trade, at expiration, the underlying share price of our options would have to exceed our per-share premium plus the strike price, or $12.50. However, we can sell the call anytime. We don’t have to wait for expiration.

You know the expression “time is money.” In options trading, it literally is. If there is time left before expiration, that can add more premium to the price. So if there are a few months left before expiration, your breakeven won’t necessarily be $12.50... It could be $11.50.

Let’s say, over the month after we entered our position, the company’s share price shot up 40% to $14. With one month to go, our call has gone up to $2.50 per share, or $250 for the whole contract.

Now, $2.50 might not sound like much, but it’s a 400% gain from our $0.50 per share buy-in.

An investment of just $500 would have become $2,500 in a single month.

Buying a put would work the opposite way.

Say we’re watching another company that trades at $10. We think its shares are very overbought, and we expect it to fall. We believe the price will drop by at least 20%. So we buy $8 puts on it that expire one month from now for $1.

Remember, because an options contract represents 100 shares, each put option would cost $100.

The share price would have to drop to $7 for us to break even at expiration. Every amount less than $7 would be pure profit. If it’s before expiration, it may not have to fall all the way to $7.

That company begins to sell off after an exceptionally bad earnings report. Its share price plummets to $4.

We sell our puts at $350 and again book a 250% gain.

Had you shorted the $500 worth of stock, you would have borrowed 50 shares at $10.

You would have then bought back those same $10 shares at $4, pocketing a gain of $6 per share. That’s a profit of $300 based on 50 shares. That’s a tidy 60% gain. But it’s far less than the 250% gain on the options.

As you can see, options are an exceptionally good way of leveraging short-term movements in the market.

That’s really the benefit of options. They work best when paired with stock picks, giving you leverage on the markets to help you in maximizing your gains.

How to Trade Options

With that in mind, let’s talk about how the market buys and sells options.

Each options contract has a bid price and an ask price. They’re also known as the bid and offer. It’s a two-way price quotation that illustrates the best price the option can be bought or sold for at any given time.

The bid price represents the maximum price that a buyer is willing to pay for an options contract.

The ask price, or offer price, represents the minimum amount a seller is willing to take for the same options contract.

A trade can occur only after the buyer and seller agree on a price for the option, which is between the bid and the ask.

The difference between the bid and the ask is called the spread. The smaller the spread, the more liquid the option and the easier it is to trade.

To the average investor, the bid-ask spread is an implied cost of trading.

For example, if you’re looking at an option that reads $1/$1.05, someone looking to buy the option would pay $1.05, while the person selling it would receive $1.

The $0.05 difference is pocketed by the market maker. That doesn’t sound like much, but remember that each contract represents 100 shares – so $0.05 a share comes out to $5 per contract.

If the spread is wide, you want to put your order in between the bid and the ask. For example, if the bid is $1.50 and the ask is $2.50, you could try placing your order to buy or sell at $2. If the market maker doesn’t execute your trade, you could try raising your price to $2.10 or lowering it to $1.95 to try to get the trade filled.

But before you can actually buy any options, you need to set up your account to trade them...

Thanks to mobile investing apps, like Robinhood and Webull, it’s easier than ever to trade options. Because of them, some big brokers are commission-free, but many have lowered their commissions to negligible levels – well under $1 per contract. And that’s an amazing new benefit for modern options trading.

Regardless of which broker you use, you’ll need to get approved to trade options. You simply have to answer a few questions from your broker, and you should be approved in no time.

Setting up your account to trade can be done in as little as five minutes.

Once your broker approves you, you’re all set. Trading options is not that different from trading stocks.

Now, buying stock is simple. You just log in to your brokerage account, search by the company’s symbol or name, select the number of shares you want, and click “Buy.”

Buying options is just as easy. It has a couple of extra steps, though. Start by looking up the options available for the stock you want.

Once you’re looking at the list, find the one that matches the expiration date and strike price you want.

When you find the option you want, select the number of contracts you want to purchase and click “Buy to Open.” To sell, select “Sell to Close.”

It’s that easy. Armed with the knowledge you’re about to receive through the Penny Options Summit, you’re all set to take giant steps into the lucrative world of options trading.

I’m looking forward to seeing you on July 14. It’s going to be an incredible event. And I can say with 100% conviction that you will walk away from the event with a newfound approach to investing... one that can help you fortify your retirement...

Faster...

Safer...

And in a more exciting way than you ever thought possible.

Click the button below to set yourself a calendar alert for 2 p.m. on July 14.

And I’ll see you at the Penny Options Summit.

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