Today I’m going to lay it all on the table. My personal trading has always had 4 components to it.
And I mix and match those 4 components infinitely to generate income from the markets. Even when they’re down.
But… first, let me start here:
2021 was a bull run like no other.
In fact, if you start from the bottom of the Covid crash in March 2020 and go all the way through to the end of December 2021, it was an epic run.
Bottom to top, the S&P gained 114% in less than 2 years.
But then, almost as soon as the calendar flipped over to 2022, markets took a turn.
At first it was just a bit, then more… and then we were in a virtual freefall.
I can remember the headlines: “The bear is back”
Top to bottom, the market lost 26% in 9½ months. Ouch.
I remember in the middle of it all, I was on the air with Celeste Lindman and she asked me what predictions I had.
But I didn’t have any predictions for her.
In fact, this is what I posted on the screen for everyone to see:
But despite that — and despite the fact that the market went down another 10% before bouncing in October of that year, it’s a market that I loved.
Because one of the major differences between how I trade and how 99% of the world trades is that I don’t really log on in the morning to see how my portfolio is doing.
See, most traders sign into their account and immediately look to see where their stock is today versus yesterday.
Not me — I only look at the cash flow.
How much is this stock bringing in for me on a monthly basis?
Because when I buy a stock, I look at it like a business:
I’m putting in an initial investment… and in return, I’m looking to get a recurring cash flow.
Simple as that.
Think of it this way:
Would you rather have a million dollars right now, and never be able to earn another penny ever again?
Or would you rather have $10,000 a month for the rest of your life?
All else being equal, the recurring cash flow is the stronger choice in my opinion.
And that’s why I don’t really care if a stock goes to the moon.
Because it’s like killing the goose that laid the golden egg — in order to get that gain out of the stock, I have to sell it.
But when I look at stocks as a way to generate cash flow, it changes everything.
And in a market like we had in most of 2022, that makes all the difference.
During the show with Celeste, I said something important: I love markets like this. It’s like turning back the clock.
Did you ever wish you could turn back the clock? Stupid question…Who doesn’t?
Well, you can’t turn back the clock when it comes to your age…
But market corrections like we had in 2022 (and like some people are saying we might soon have in 2024) are like turning back the clock on stocks.
So how do I generate cash flow from these stocks?
Here’s the screenshot from the show detailing my 4 part strategy:
1) High impact dividends – I’ve shared my personal list of Forever Stocks before. These all pay dividends and they are great for creating cash flow using the other strategies listed below as well.
2) Short bias options – the CBOE wrote in a letter to the SEC that covered call strategies are actually SAFER than just buying and holding a stock. You can’t get a much better endorsement than that!
3) Long bias options – A lot of people think of selling naked puts as a scary thing. But in my experience, I hardly ever get assigned a stock — even when I’m purposely trying to get assigned! And then as soon as I get assigned, I turn around and start selling covered calls.
In fact, once you learn #2 and #3 well enough, these two strategies feed into each other, and it’s like a wheel… Sell naked puts until you get assigned, sell covered calls until you get called away. And you’re generating cashflow the whole time. Talk about winning!
4) Stock value increases over time – Did you know that most of the time, the market is in a bullish trend? Statistically speaking, the market is bullish most of the time. And as long as you aren’t picking some clunker of a stock (see my list of Forever Stocks above), you can pretty much expect that over the long term, your high quality stocks will gain in value.
So there you have it. That gives you the 4 part strategy at work in my trading.
Curious to learn more? Head over to my Telegram channel and drop a reaction so I know what you want me to cover next.
Trade well,
Jack Carter
