Have you discovered the financial benefits of share renting? If you have delved into the world of options, you probably have a passing understanding of the covered call option.
Astute investors use this important stock market strategy to insure their stock portfolio. The investor rents their shares to provide income regardless of the movement of the market.
In particular, if the market goes down, while the underlying stock price declines, the rental premium continues.
To give an example of how this works, you can consider the similar arrangement of owning rental income.
The analogy of selling share rental can be compared to rental property. If you wanted to buy and sell real estate to make money, this is similar to the buying and selling of stocks in the market.
The strategy would be to buy a piece of real estate with the intention of renting to another person. The owner continues to own the property, but another person pays the rent to the owner for the use of the property.
If the underlying value of the property declines, the owner still receives the rental income. In the example of buying and selling real estate flat out, you can buy the property at one price and experience a decline in property value. Upon selling, you will take a loss.
If you are actively using the property to rent out, the rental income needn’t decrease with the decline of property value. If the value of property increases to what in this stock market strategy could be called the strike price, the property owner simply gets back the price of the house.
This process can correctly be called share renting. The analogy to property purchase and rental describes clearly the intention of share renting.
The rental property owner, of course, has the responsibility of building maintenance, general maintenance, lawn care, snow removal and so forth. The landlord knows the annoyance of the 5:00pm, Friday afternoon phone call from the tenant about the dripping faucet.
With this stock market strategy, the peaceful investor can obtain the same income result without the personal involvement with a tenant or the worry of building maintenance and liability.
A good education and sticking to strict criteria is important to develop this stock market strategy. The continuing income generated by share renting can be crucial to your peace of mind and wealth creation.
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