If You Are Thinking About Buying a Stock, Stop and Think About This First Modest Money1 Comment

I am a simple man, and I like Bank of America (BAC) this year.  We all know interest rates have been low for a long time and we all know they are going to rise.  It is only a matter of when.  We also know that banks do well when interest rates rise because they make more money on loans – which is their business.

I was a stock broker and trader for some of the largest online brokerages in the U.S. like TradeKing Inc., Zecco and others.  I always knew that people could be much better off by using just this one simple trick to get more cash and a lower cost basis on the stock they were going to buy anyways.

Lets say you want to buy 100 shares of BAC.  That is a $1600 investment roughly.  You like BAC at $16/share and you want to buy it now.

STOP!!!

Instead of just buying BAC at $16, sell a little something called a “Put”.  Let me give you a real life example.  A put is an Option contract that gives the buyer the ability to sell 100 shares of BAC to you at $16/share if he chooses any time before April 20.

You SELL…

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