It's So Easy, a Pro Golfer Can Do It

Doc Eifrig is taking over the Digest... The strategy he learned 30 years ago... Why you shouldn't ignore him... A way to boost returns with less risk... Income from nowhere... A real-money demo with a PGA Tour pro...

Editor's note: As I (Corey McLaughlin) mentioned yesterday, Stansberry Research partner Dr. David "Doc" Eifrig is taking over the Digest for a few days... because he has something important that he feels he needs to tell readers right now...

And when Doc tells us this is the case, we listen. As you may know, he is something of a Renaissance man and is unlike anyone we've ever met in this industry.

In the 1980s, Doc worked as a Wall Street trader, before getting sick of the conflicts of interest he saw and deciding to pursue a different career... He then became a board-eligible eye surgeon but left medicine, too, when he realized it was as corrupt and flawed as Wall Street.

Fortunately, Doc eventually found a calling in writing newsletters. And for nearly two decades now, he has valued sharing what he knows about finance and medicine directly with hundreds of thousands of readers. Over the years, he has branched out a lineup of five different publications, each with a distinctive focus. This brings me to what Doc wants to talk about in the Digest over the next few days...

It's the details of the trading strategy he learned 30 years ago as a trader at Goldman Sachs. This strategy is chronically overlooked and not even known by most individual investors – even though it can produce steady, safe returns over the long run, even in uncertain or below-average markets.

Doc will explain all the details. What's more, this strategy is so simple – and Doc is such a great teacher – that I firmly believe anyone who takes the time to listen to his advice can learn how to do it. In fact, as he'll explain, Doc recently visited a professional golfer in search of "private-jet money" to give him a hands-on, real-money demo and prove it...

As Doc begins today, most people will still ignore him... I'd suggest you hear him out at least.

I (Doc Eifrig) know without a doubt that the bulk of you won't read past the next sentence...

That's because this entire series will focus on options.

It's simply the way the world works... As soon as I say "options," folks click away.

If you have a well-allocated portfolio and you're happy with your investment returns, learning how to use options may not be a priority for you. That's OK. I get it, I do. But... you'll miss out on an easy investing lesson.

Other folks will want to read on. Because if you'd like to earn higher returns in the years ahead, options will help you do that. More important, options will actually help you reduce the risks of investing in the stock market.

In fact, I'm confident that options are the only strategy that regular investors can use to both reduce risk and boost returns. It just requires making a small change to the way they trade and invest.

If you don't like letting your wealth rise and fall with the whims of the market, I hope you'll pay close attention to the Digests I'll share with you today, tomorrow, and Thursday... because I can help you do much better and avoid the frustrations.

I'm going to share the three reasons investing in options can be safer and more profitable than the market as a whole... especially over the next five to 10 years.

I learned the world of derivatives when I was recruited by Goldman Sachs out of business school...

At that time, it was the most exciting place to be on Wall Street. The market for derivatives (a more wide-ranging term that includes options) had been around for a while, but it was just then maturing into a monster.

We'd march into the offices of CEOs and CFOs and show them how they could reduce their risk while still earning great returns. And we were paid crazy amounts of money to do it.

I thought we were playing the short game. Surely, once people found out how easy options were, the jig would be up. Our options techniques were too easy to keep secret. Soon, everyone would know about them.

Thirty years later, that has never happened...

People still don't take the time to learn how to build wealth with options. Big corporations still go to Goldman and JPMorgan and pay millions to have someone else put these strategies to work.

And the way the markets look today, I think options will serve you richly in the years ahead... because returns may be especially hard to come by through most other trading strategies.

Overall, I'm a market optimist...

Staying invested in stocks over the long haul is the best way to build wealth.

From 1950 to the end of 2022, stocks have returned 7.9% per year, according to data from Nobel Prize winner Robert Shiller. So when folks plan their financial future, that's roughly the return they expect to get over the next 10 or 20 years.

But I've always been skeptical that even 70-plus years of data are enough to really understand the markets.

And between the economy, technology, and politics, things are drastically different than they were in the past. What do stock market returns from the 1950s tell us about returns in the 2020s?

Again, I'm a bull. But the conventional wisdom that stocks will return 7% or 8% a year has big flaws.

For one, that average doesn't hold up over the very long term or over every period...

Take a wider look from 1871 to 2022, and stocks returned just 4.6% a year (again, using Shiller's data). And we've seen long stretches where stocks have stayed flat...

From 1929 to 1954, stocks returned nothing. From 1973 to 1985, stocks returned nothing. From 2000 to 2013, stocks returned – you guessed it – nothing.

And if you want to look at the past five years – which included a mega-pandemic bust, a speculative boom, a year-long crash, and a return to a bull market – well, that just proves that you can't depend on consistency from the stock market.

If you were saving and eyeing up growing your money to retire, well, depending on the timing, you just might have been out of luck. Your dreams of getting wealthy and living a comfortable retirement could have been dashed.

What if one day we look back and say the same thing about the coming decade?

What's more, folks certainly think stocks are expensive today...

The cyclically adjusted price-to-earnings ratio (or "CAPE" ratio) measures the valuation of stocks with a long-term view that spans the business cycle. It doesn't help predict the market in the short term, but it does give a good idea of what may happen over a longer period of time.

Today, it says stocks are expensive...

Depending on how you measure, historically, buying at a CAPE ratio of 30 means you can expect returns as low as 1.9% a year for the next five years.

Meanwhile, interest rates are rising off historic lows. That could spell the end of the 30-year bull market in bonds.

And we haven't even talked about the inevitable market pullbacks and corrections along the way... or the potential for bigger crashes.

In total, it's entirely possible that any investment assets just won't deliver returns to anyone for years.

Except for options, that is...

When used correctly, options reduce the risk of holding stocks...

That's right. Most folks think of options as a type of leverage or a way to make wild bets. But we love to use them to do the exact opposite.

Essentially, I see options as this sort of mathematical guarantee. And you can learn to understand why with just the most basic understanding of options.

Our strategy is simple...

We own a stock and we sell an option contract against it. When we sell that contract, we receive cash up front. (There's more to it, but that's all you need to know to understand how options reduce risk.)

For example, if we buy a stock for $20 and sell a $1 option against it, we've collected $1. The stock is still trading at $20, but our "cost basis" is now $19.

Of course, the risk when you hold a stock is always the same. In theory, any stock can go to zero, but let's assume you're using a stop loss and you'll sell if it falls to $15.

Without the option, you hold a $20 stock that cost you $20... and you can lose up to $5 per share if it falls to $15. With the option, you still own a $20 stock, but it only cost you $19. You only have $4 at risk if it falls to $15. In this example, by taking in the extra $1 as income, you just cut your risk by 20%.

Earning option income lowers your cost basis, making it less risky than holding the exact same stock.

There is no other way to reduce your downside in the market like my simple options strategy – one where you get paid up front.

If you hated watching your stocks drop in 2001, 2008, or 2022, options make those times much less painful.

While the best investors obsess over risk, we know that most investors tend to focus on returns...

Options can satisfy that desire as well...

Simply put, options provide the same – or better – returns, with less risk.

Everybody wants better returns. Options deliver them when markets are down or anemic. At times when markets rise quickly, my favorite options strategy can lag on total returns – but still provide better risk-adjusted returns.

We can prove this unequivocally...

Like I said, the basic idea of my options strategy isn't a secret. I learned it on Wall Street three decades ago. As such, finance guys and academics have studied it in all sorts of ways. I even hired someone whose specialty is econometrics.

My research team and I spend weeks putting together research to find the most promising opportunities. That strategy has rewarded our readers handsomely.

But you can make a "For Dummies" version of the strategy. You don't have to think about the economy, or the businesses behind the stocks you own, or the value they possess.

You just take the "market return" and use a few simple rules to set up the options strategy. This isolates the pure returns that the options themselves generate.

From the end of June 1986 through yesterday, the options strategy has returned 8.2% a year, while the S&P 500 Index (with dividends reinvested) has returned 10.5%.

Meanwhile, the standard deviation on the options strategy was 12%. The same number for the market is 17%. In other words, this strategy requires roughly one-third less risk.

Put another way, when the tech bubble burst in 2002, stocks fell 22%. A portfolio built from this options strategy would have dropped only 7%.

During the financial crisis of 2008, stocks fell 37%. The options strategy fell just 28%. Again, that's a 25% reduction in volatility and angst.

In 2022, when the stock market fell 19%, the options strategy fell just 11.3%.

In short, this strategy performs better in down or flat markets, and it performs just about as well when the market rises. It can protect you during the scary times, while providing good returns during all others.

Again, these quoted returns assume no thought, no research, no insight. These are just the returns that a pure, dumb, option-trading robot could create out of thin air. I call this "income from nowhere"... And I'll explain more about how I use options to create these returns later.

In the meantime, it's important to realize we can do much better than this "For Dummies" version. Our option trades regularly target annualized gains of greater than 20%. And it's far simpler than you might expect.

Unfortunately, most investors won't take the time to figure this stuff out...

I can't think of a bigger missed opportunity.

Investors don't want to learn about options because it requires learning some new terms and using some basic math. Busy folks just aren't willing to sit down and learn something new.

To me, that's a boring and poor way to live.

But more important, what if I told you that you can learn the basics of options in an afternoon? Then you can make a trade or two, and you'll completely understand this simple strategy.

Considering that these few hours of work will earn you tens of thousands of dollars over the years to come, it has to be the highest "hourly rate" you can make.

Others learn the basics but still get overwhelmed. For example, when you log in to your broker's platform and open an "option chain" that displays all the available options on a stock, you suddenly see hundreds of choices.

But once you've learned our strategy, you can narrow that down to only a few potential choices, and you can decide which one works best for your personal strategy in less than two minutes.

Most "traders" jump into options and do it wrong, lose money, and never try it again. Don't be like them.

My strategy fixes every one of those problems...

It's simple, quick, and has an extraordinarily high win rate. (For the record, since we launched my option-selling service in 2010, we've earned and published the profits on 663 of 703 positions, a win rate of 94%.)

If you need to keep earning returns to secure your financial future, this strategy is for you.

If you prefer less risk and smaller drawdowns, this strategy is for you.

And if you like higher returns – and who doesn't? – this strategy is for you.

As I'll show you over the next few days, options can improve your financial future with little fuss...

I've been helping thousands of readers do just that for more than 10 years... And now, I'd like to share the method with you.

I can't wait to show you more of our work. I think you'll be delighted by what options can do... and how simple they can be.

Tomorrow, I'll share more about why options were created, what every investor gets wrong about them, and how they can produce better returns than any other asset offers.

Then, on Thursday, I'll show you how options generate "income from nowhere," how to make a trade, and what kind of results you can expect.

I hope you'll stick around.

In the meantime, if you want to learn even more right now, you can watch a recent hands-on tutorial about this strategy that I recently gave Stansberry Research-sponsored professional golfer Kevin Kisner down at his home course in South Carolina...

Like many folks, he had a tough year in the markets in 2022... and wanted to try something new to make money...

Kevin said he wanted "private-jet money," and I walked him through how he could collect "income from nowhere" immediately in his brokerage account in a real-money demo. He was afraid at first and had zero experience with this strategy, but I showed him exactly how much income he could collect, how simple it can be, and why he should try it.

Click here to watch this demo right now, and I'll be back tomorrow with more here in the Digest.

New 52-week highs (as of 7/31/23): Apple (AAPL), Adobe (ADBE), Analog Devices (ADI), Booz Allen Hamilton (BAH), Berkshire Hathaway (BRK-B), Cameco (CCJ), Commvault Systems (CVLT), CyberArk Software (CYBR), Dice Therapeutics (DICE), EHang (EH), Expeditors International of Washington (EXPD), Comfort Systems USA (FIX), Fortive (FTV), Gambling.com (GAMB), Alphabet (GOOGL), iShares Convertible Bond Fund (ICVT), Madison Square Garden Sports (MSGS), New York Community Bancorp (NYCB), VanEck Oil Services Fund (OIH), Invesco S&P 500 BuyWrite Fund (PBP), Parker-Hannifin (PH), Ryder System (R), SoFi Technologies (SOFI), SPDR Portfolio S&P 500 Value Fund (SPYV), ProShares Ultra S&P 500 Fund (SSO), Constellation Brands (STZ), Trane Technologies (TT), The Trade Desk (TTD), Textron (TXT), United States Commodity Index Fund (USCI), and Vanguard 500 Index Fund (VOO).

In today's mailbag, feedback on yesterday's Digest, which covered oil's price movement lately and trucking company Yellow going out of business... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"What a surprise, oil is up 20 percent in a month. NOT. It's the peak driving season and China is trying to come back from the dead. And Russia is cutting back on production as well as Saudi Arabia. Not to mention the rig count has been falling for months.

"Also, it's a sad day when a 99-year-old company throws in the towel and calls it quits. I am close to that situation because I was a Yellow employee. It was a comedy of errors from the start. The leader of YRC [Yellow] at the time... negotiated a buyout of Reddaway and Roadway Express at insane prices and booked up a pile of debt that was impossible to pay off... And now to put the final nail in the coffin, the Teamsters president is putting 20,000 employees out of work because he is stuck between a rock and a hard place with the other Teamsters trucking companies. If he negotiates a sweetheart deal with YRC and keeps them in business, he will weaken his position with the other Teamster companies.

"So all those dedicated, good employees at YRC have to go somewhere else and start all over. It's a travesty of poor corporate management and the structure of large unions." – Subscriber John M.

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

Dr. David Eifrig, MD, MBA
Baltimore, Maryland
August 1, 2023