Stock Enhancement Strategy
Using the same concept as the stock repair strategy, you will see how to significantly enhance the return on a stock investment. The stock enhancement strategy uses options to expand the profit on your stock with no additional cost. A further enhanced return is achieved when a cheap surrogate is substituted for the stock.
Let’s look at an example to illustrate the stock enhancement strategy:
Example 3. In early March, you buy 100 shares of ZYX at $58 per share. Your plan is to hold this stock for the long-term with a target of $75.
If your target is reached, that represents a nice profit of 29 percent. Let’s see how we can do much better for no extra expense using stock enhancement:
Trade: Buy 1 Jan 70 call for $3.70 ...