A Conservative Way to Generate 15% Returns on Your Portfolio

Today, I'm going to tell you about the greatest income-producing tool for retirees. And if you can understand how real estate works, you can use this tool to safely and conservatively generate 15% or more in annual income on a retirement account.

It all starts with the familiar real estate idea of offering owners a lower price than what they are asking...

This strategy involves one of the most powerful – and most misunderstood – financial tools ever created: stock options.

When most folks hear the words "stock options," they think of risky bets on volatile moves in the stock market. Nothing could be further from the truth.

A stock option is simply a contract between two people. One type of option is called a "put option." The person who buys a put has the right – but not the obligation – to sell a stock at a given price, in a given time period. The person who sells a put has the obligation to buy a stock at a given price, in a given time period.

Done properly, selling put options is one of the greatest money-making strategies ever created. And it's simple, once you get the hang of it.

It may help to think about it like a real estate transaction...

Let's say you're familiar with a particular neighborhood and the values of the homes in it. And let's say you see an attractive little house for sale and figure paying $200,000 for it would be a good deal... and paying $190,000 would be an even better deal.

Here's where a put option comes in...

You approach the owner of the house and start talking. He's nervous that real estate is about to hit the skids again, causing the price of his home to sink even further, and scaring off would-be buyers.

You tell the homeowner: "Well, you never know what will happen. But I think I can help you out. I'll agree to buy your house for $190,000 if you want to get it off your hands. That offer is good any time for the next 12 months, no matter what happens."

The nervous homeowner agrees to your offer... He's happy because now he knows he's guaranteed to get at least $190,000 for his home, so he's willing to pay you $1,000 in cash to seal the deal.

This is generally how selling a put option works. You (the put option seller) enter into a contract with the homeowner (the put option buyer) that gives the buyer the right, but not the obligation, to sell that house to you for $190,000 sometime in the next 12 months.

If the "calamity" the homeowner is worried about does not arrive in the next 12 months and home prices in the neighborhood remain robust, he won't be interested in selling his house to you for $190,000. You keep the $1,000 free and clear. The transaction is finished... over... done.

This kind of transaction happens over and over in the stock market...

Real people are collecting hundreds or even thousands of dollars simply for agreeing to buy a stock at a discount.

For example, in late 2011, one of my favorite blue-chip companies, Microsoft (MSFT), was trading for a little more than $25 per share. I thought this was a bargain price. Microsoft is one of the greatest cash-generating businesses in the world.

I told my readers to enter the market and receive cash by agreeing to buy Microsoft at $25 a share, or just a bit lower than the current price. Like the potential buyer in the housing example, my readers received cash for offering to buy Microsoft. For every $10,000 of stock they agreed to buy, they immediately received $440.

Over the next few months, Microsoft enjoyed a rally from $25 per share to $31 per share. So like the potential buyer in the housing example, my readers simply pocketed the money. By January 2012, the transaction was finished... over... done.

I know this can sound confusing if you're not used to the idea. But just know this: You can get paid for agreeing to buy shares of valuable companies for less than their current share prices.

As I mentioned, my readers and I have put together a tremendous track record using this strategy. Many write in to say it has completely changed the way they invest... and changed their retirement for the better. It is helping people earn hundreds or even thousands of extra dollars a month.

And if you can understand real estate, you can put it to work for you.

Here's to our health, wealth, and a great retirement,

Dr. David Eifrig