Options Trading Guide For
Dividend Investors

Options trading should be a fundamental aspect of any dividend investor's investing strategy. It allows investors to leverage a small amount of capital for significant gain. Options are really the only reasonably safe product to allow the individual investor to "short" a bear market. It is also the only reasonable way for a small investor to hedge his or her portfolio against losses. There are many other reasons to employ options as part of your strategy.

But don't just take my word. Click here to read a short article on Options Advantage by the professional traders at Options University where they outline the advantages offered by options investing.

Need real life example to convince you that options trading works?

On Friday, November 5 2010, I concluded that the stock market sentiment was overly bullish. Why? Small investor bullish sentiment was at an extreme reading, the Put/Call ratio was at extreme low readings, insiders had just sold more stocks during that week than at any time previously.

I decided to do two things.

First, I put a 30% hedge on my portfolio by buying 10 at-the-money Put Option Contacts (SPY 122 expiring DEC10) for $3.22. This established some down side protection on my portfolio.

Second, I established Bear Call Spread by selling 10 SPY 124 NOV11 Calls and simultaneously buying 10 SPY 127 NOV11 Calls for a credit of $370.

One week later, the stock market was down by slightly more than 2%.

• My long Put Options were worth $4.86 per contract (a $1,640 or 51% gain in one week).
• The Bear Call Spread expired worthless, so I pocketed the $370 credit.

Here's another example, this time using the successful portfolio hedging strategy I have developed to protect against large stock market losses:

• I initiated a put option hedge back in May 2011. I did not touch my portfolio for the next four months.
• By August 2011 the S&P 500 dropped about 12% (from 1,360).
• My portfolio actually gained 2% in value.

Now, some of my portfolio's performance is due to individual equities within the portfolio (like the gold position I have held for the past 3-years, or the dividend paying blue chip stocks that tend to be less volatile than the stock market).

But a big part of the portfolio's performance is due to the hedge. Of course, there is no way I can say how your portfolio will perform. I'm just telling you my experience.

Learn more about my strategy by clicking on the eBook below.

For those who need to learn about options these links provide the basic necessary information needed to get started.

• Learn about Call Options by clicking here


• Learn the fundamentals about Put Options here


• You can't start trading options without knowing about Options Greeks. Click here to learn more.


• Get a free report called the "7 Deadly Mistakes People Make When Trading Options"

Learn options strategies that can help protect your portfolio. Combined with your consistent dividend income you can supercharge your returns in down and sideways markets.

• Use Protective Puts to protect individual stocks from losses by clicking here


• Use Options Collars to protect stocks more cheaply than Protective Puts


• Learn how to make money from a stock without owning it! Naked Put Options allows you earn income while waiting for the right price


• Use Index ETF Put Options to hedge your entire portfolio against losses


• Earn extra income from your dividend stocks with Covered Calls


• Earn extra income by employing Credit Spreads

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