THE MOTLEY FOOL OPTIONS

ULTIMATE INCOME REPORT:

 
YOUR INTRODUCTION TO OUR #1
OPTIONS INCOME STRATEGY
Brought to you by the Motley Fool Options team

Thank you for your interest in Motley Fool

Options. Right now, you’re taking what we’re
convinced is an important rst step toward
meeting your nancial goals...
One that we can say with certainty most investors will never even attempt!

And one that should make you a better, smarter, and yes, richer investor.
Because while most people are convinced that options investing is "risky"...
"complicated" or "out of my league"...
Used our way, we believe nothing could be further from the truth. This
report is your introduction to what we call Foolish options investing. First,
you'll get a brief overview of how options work and why we like them.

Then we'll dive into a handful of examples that demonstrate the power of
our favorite options income strategy.

Let's begin with a strategy that our team has found both easy to master
and relatively reliable...

In fact, with modest stock positions and little to no out- of-pocket

expenses, you can potentially start writing yourself four- gure income
checks every few months. To put that in perspective, think about how large
your stock positions need to be for similar amounts of cash from
dividends:

You would have to own close to $150,000 worth of Procter &

Gamble to make around $1,129 in a quarterly dividend payment...
or a little over $75,000 worth of Coca-Cola to make around $1,196
with two quarterly dividend payouts... or nearly $80,000 worth of
Apple to make $1,731 in annual dividend payments.

Now consider traditional "safe" income investments like Treasury

bonds and CDs. With 10-year Treasury bonds at just 1.7% recently,
it would cost you $50,000 just to generate a measly $849 in
annual income... Short-term CDs are worse still. With the average
yield on a one-year CD as low as 0.27%, you'd need a whop- ping
$370,370 just to earn $1,000 in a year.

And keep in mind, that's just to generate $1,000. If you want to earn
$10,000 a year, you'd have to cough up 10 times as much!
Yet, with the simple and easily repeatable trade
you'll see straight ahead, Motley Fool Options
members generated $3,117 and $2,850 in extra
income...
As you may already know, an option is just a simple contract. It gives you
the right to buy or sell 100 shares of an underlying stock at a set price (the
strike price) by a set date in the future (the expiration date).

And as you've probably heard, there are two kinds of options: a call option
and a put option. A call option goes up in value when the stock price goes
up. A put option goes up in value when the stock price goes down.

Buying options can be risky for a number of reasons... Because they expire
in a number of months... because you have to pay a premium to buy them...
and because you have to be right about the share price, the direction, the
magnitude, and the timing of the move. And all those work against you
when you're buying options.

In fact, studies show that 75% of options held to expiration actually expire
worthless. And that leaves the option buyer with nothing.

That's why in Motley Fool Options, we mostly prefer to sell options. Which
we think puts all the odds in OUR favor. And it works perfectly with our
goal, which is to make regular income that strategically complements our
long- term stock holdings.

Because when you SELL options, you get paid money right up front. And
when the option "expires worthless" (as we already know they usually do),
the buyer gets nothing, and YOU, the seller, keep all the income!
See, when you sell options, you get paid money
right up front. It's as simple as that...
Take Open Text (NASDAQ: OTEX), for example - which came to us from
Motley Fool Rule Breakers. We set up our rst income play on OTEX back in
December 2009.

Allowing our members to collect ve income payments of $630... $540...

$219... $1,275... and $453. That's $3,117 in extra income.

We've recommended selling puts on Open Text four different times (and
one covered call). And that's allowed us to collect a steady stream of
income payments over the past few years...

Here's how it works: Open Text is an enterprise software company that bills
itself as "The Content Experts."

Back in December 2009, we had done our Foolish homework on Open Text.
We had put the business under a microscope... Dug through the underwear
drawers... Made a nuisance of ourselves asking questions.

When we were done, we felt we knew as much about the underlying

business as the management team did. And we were con dent that the
company was ripe for a put-selling play.

We knew that by selling puts on the company, we would either A) Make a

boatload of income or B) Have the opportunity to buy shares of Open Text
at a lower share price in the future.

So on December 16, 2009, with the stock trading at $37.81, we

recommended that Motley Fool Options members SELL May 2010 $35
puts. And as long as the stock did not drop below $35, we'd keep all the
income.
So how did we do? The stock was trading above $35 at expiration, locking
in $210 of income for every contract we sold.

If you had sold just three put contracts when we recommended them,
you would have pocketed $630 in income.

But we weren't done yet. There was still plenty more income to be had. So
in November 2010, we told Motley Fool Options members to sell the
February 2011 puts and collect $180 per contract.

Again, if you had sold three put contracts when we recommended them,
you would have pocketed $540 in income when the options expired
worthless.

(That just means that the buyer walked away with nothing, and YOU, the
seller, kept all the income!)

Then in February 2011, we told Motley Fool Options members to sell the
March puts and collect $73 per contract.

This time, had you sold three contracts, you would have quickly pocketed
another $219 in income when the options again expired worthless.

Our fourth go-round started in March 2011, when we recommended that

members sell August 2011 $60 puts for $425. As August expiration
approached, the stock dropped to around $55, giving us the opportunity to
buy the shares - an outcome we were perfectly happy with!

In fact, since that time, we've earned an additional 97% in returns on the
stock. And we've also been able to write a simple "covered call" on the
stock for even more income.

So combined with the $425 from the original transaction, this next round of
trades on Open Text paid us a total of $151 per contract. If you were
working with three contracts, that's another $1,728 in income...

For a total of $3,117 in extra income you could

have pocketed... plus an 97% gain in the long
position from just one stock... using a few simple
options plays.

So Why Isn't Everybody Selling Puts?

So you might be wondering: If it's so easy, why don't more people do it?

Well, the simple answer is that they're afraid they'll end up owning the
shares. You see, with put selling, if the stock drops dramatically, you end up
buying the shares at the strike price you agreed to when you sold the
option - but you still keep the income the put options paid you, so your cost
basis on the stock is even lower than the strike price. (Just like we did with
Open Text!)
And that's the big mistake that most people make with put selling. They do
it on stocks that they would never want to own!

But here at Motley Fool Options, we ONLY sell puts on stocks that we
would love to own at a lower price. (As I've said, these are all stocks from
The Motley Fool universe. In other words, fully vetted picks, just likeOpen
Text, which has already earned us a large return to date!) So it's like
entering a "limit order" to buy stocks you like at a steep discount.

Now, at the risk of bragging a bit, we do want to point out here... with a
more than 90% success rate on our closed trades, we don't often end up
buying many stocks when we sell puts here at The Motley Fool.

But we were very happy to buy Open Text for $60 per share. Why? Because
that buy price was well below our estimated fair value. And in fact, the
stock trades for around $120 today (after adjusting for a 2:1 split that
happened in 2014).

So we have generated $3,117 in total income since August 2011 with

just one stock... and earned a huge gain in the long position.

Let me share one more example...

In August 2013, we recommended Motley Fool Options members sell the
January 2014 $35 puts on CaesarStone (NASDAQ: CSTE) for $373 in
income per contract.

If you'd sold three contracts, you'd have earned $1,119. Again in November
2013, we told members to sell the April 2014 $40 puts. They collected $296
per contract. If you'd followed along and sold three contracts, you would
have earned $888.
And then AGAIN in May 2014, we advised members to sell the October
2014 $45 puts, collecting another $281 in income per contract.

This time around, if you'd followed along and sold three contracts, you
would have earned $843.

All in all, if you had followed along with all three trades and sold three
contracts each time, you would have earned $2,850... all without ever
buying a single share!

It's a fundamental strategy so great that Jeff

Fischer still uses it in his own personal portfolio...
Writing puts on Foolish recommendations like Google, Apple, MasterCard,
and Visa. And perhaps most often, Facebook.

Which has allowed him to amplify his returns several fold... and collect
considerable amounts of income each and every month simply for
agreeing to buy more Facebook stock at a cheaper price if it falls.

For nearly four years now, Jeff's written puts on Facebook - month after
month for some stretches. Meanwhile, the shares of FB that Jeff owns
have also done well. (More than doubling, in fact.)

But the put income Jeff has earned has dwarfed the stock gains (even
after paying out short-term capital gains taxes on the income)...

You can do it, too. By writing puts on the stocks you actually want to own
for the long haul (even if you already own shares), you can not only pump
up your return with income... you can also scoop up more and more shares
on the dips. And who wouldn't be happy to add to your favorite Foolish
stocks if that happens, right?
With put-writing, you can pro t when the stocks in your portfolio are going
nowhere (or even when they fall modestly).

Here's how to jumpstart your Foolish options

investing career today!
Did the strategies described above sound good? Are you excited by the
possibility of turning your portfolio into a cash-generating options
machine? Of course!

Now many investors get excited when they discover the power of options.
But they never take the critical next steps, because placing that rst
options trade can be a little intimidating.

You have to select the ticker, the strike price, the expiration date, and the
price of the option itself.

That's a steep hill to climb when you're just starting out. But Motley Fool
Options is designed to make options investing as easy as possible.

Every month, as a member of Motley Fool Options you'll receive several

investment ideas with step-by-step instructions for placing the trade in
your own portfolio.

With these trade alerts in your hands (and the knowledge that 92% of our
closed trades have been pro table), you can get started with the
con dence of knowing that you're following expert advice.

If you'd like to learn more about Motley Fool Options, simply click here for
all of the critical details.
Motley Fool performance data as of September 30, 2016. Suzanne Frey, an executive at Alphabet,
is a member of The Motley Fool's board of directors. David Gardner owns shares of Alphabet (A
shares), Alphabet (C shares), Apple, and Facebook. Jeff Fischer owns shares of Alphabet (C
shares), Apple, Facebook, MasterCard, Open Text, and Visa. Jeff Fischer has the following options:
long January 2017 $35 calls on Coca-Cola and short March 2016 $108 puts on Facebook. Tom
Gardner owns shares of Alphabet (A shares), Alphabet (C shares), Facebook, and MasterCard. The
Motley Fool owns shares of Alphabet (A shares), Alphabet (C shares), Apple, Facebook,
MasterCard, Open Text, and Visa.