By now, most Stansberry Research readers know we like "big tech" as a cheap and safe way to profit from a market rally.
Big techs like Google, Microsoft, and Intel aren't sexy "hypergrowth" stories anymore, but they ARE dominant near-monopoly companies with thick profit margins and huge piles of cash.
Plus, as Steve Sjuggerud pointed out in DailyWealth, when you factor in the large cash piles of big tech, many of these stocks are trading for less than eight times forward earnings.
That covers the "fundamental" case. And in last Monday's essay, I covered the basic "technical" case... how Intel and Microsoft have put in tradable bottoms. In today's essay, I'll show you how a trader can turn this situation into a safe income machine...
Let's go back to Microsoft (NASDAQ: MSFT, Stock Forum). The world's dominant software company suffered a rotten summer. Shares fell from a high around $31 to a low of $23.
But as you can see from the chart below, the $23-$24 area has served as a hard floor for the stock.
You can use this floor as a base to build a covered call strategy around. (If you're unfamiliar with covered calls, you can read how this strategy works here.)
Right now, you can buy shares of Microsoft for around $24.42. You'd have $23 as a safety point. (Due to its cheapness and bullish chart pattern, it's unlikely Microsoft will drop below that level.) And you could sell the November $25 calls for about 70 cents.
This trade would result in an immediate 2.8% premium on your shares on calls that expire in less than two months – or about 17% annualized.
Let's say you buy 200 shares of Microsoft for $4,884. You'd collect around $140 in super-low-risk premium for selling covered calls on your stake. And once those calls expire, you could do it all over again.
Now remember... when you sell covered calls, you are selling away the big upside that owning a stock offers. But if you're like many investors and traders, you're not interested reaching for the moon right now. You're interested in a safe 10%-20% return per year.
That's the kind of return a covered call seller is looking at with Microsoft right now. For folks interested in unconventional short-term income ideas, big tech is a great place to find them.
Disclosure: The author does not own positions in any of the stocks mentioned