The Insurance Salesman

January 8, 2015 in Uncategorized

I have had several conversations over the years with people who feel that investing is too much like gambling.  And I can’t argue that there isn’t risk involved.  There is risk in everything.  But I do want to make a case to help some of these people learn that, with effective education and research, investing can become a successful business for those motivated to make it happen.
When asked what some of the top performing industries are in our modern economy most people would probably say things like, technology, manufacturing, pharmaceutical, agricultural, BANKING.  Things like that.  And they would be right.  Another big consistent performer is the insurance industry. Insurance companies “sell” peace of mind.  They say that for a premium, they will cover your losses up to a certain point for a certain amount of time if a certain thing happens, car accident, fire, someone slips and falls, etc.  Insurance companies make a successful business out of this by calculating the amount of premium required to mitigate the risk involved and insure entities with low probabilities of suffering losses so in an ideal circumstance a patron pays for coverage, the insurance company collects the premium, the patron receives peace of mind, the coverage comes to term without the insurance company ever having to cover a loss.
This may all sound well and good.  But you probably feel there is no way you could ever pull together enough money, experience, or capability to run an insurance company.  And that may be, but one way way to invest in the market is to collect premium by selling (writing) stock option contracts.  Stock option contracts (or more commonly referred to simply as Options) are essentially insurance contracts that say if the buyer of the option suffers a particular loss on a stock during a particular time then the seller (writer) will cover the loss up to a certain point.  You may not have the where with all to start writing life insurance policies for people, but with a modest amount of money and a growing understanding of the stock market and the metrics surrounding stock option contracts, most people should be able to develop a successful trading strategy (business model) selling stock options (insurance contracts) for consistent profits. 

Now to give an idea for what I mean when I say “a modest amount of money” and “consistent profits”  here is an example of a trade:

On 1/5/15 I looked at the following chart and assessed the underlying stock, UNG, to be undervalued and near support.  -


2015 01 05 TOS CHARTS The Insurance Salesman

UNG Support

And I entered the following trade collecting $90 of premium to cover up to $1500 of loss on UNG for a period of 45 days.  I know that may not seem like a lot.  But that is a 6% return in 45 days. Not the fastest growing business model.  But a growing one nonetheless. - 

2015 01 08 17 23 49 UNG 1 5 2014 OPEN ORDER1 1024x223 The Insurance Salesman

UNG Trade

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