My Wealth Building Strategy

Main Street beats Wall Street is primarily a site devoted to learning the art of options trading – which it will continue to be. However, as I will explain below, I have decided to expand the scope of the site, and I am very excited for this expansion and development. By way of background, for those new to the site, I designed it to help people learn how to trade options by various means, including, educational material, advice, and actual live examples from my own trading! Subscribers who have been reading Main Street beats Wall Street since 2016 have received every one of my trades, as I made them. I have been completely transparent with the results. I see “gurus” and “experts” advertising expensive sites and newsletters every day. No one does what I do! And I do it completely FREE! You can read the pages of my trade history from 2016, 2017, 2018, 2019, and 2020 and see my results. Every trade was posted as I made it. Why do I do it? Because at heart, I’m still that basketball coach who loves to see his students do well. And at no personal gain to me, other than the satisfaction of seeing those that I teach, excel. PERIOD!

I am well aware that becoming an options-trader takes a lot of time and a lot of studying. Many days I’m burning the proverbial candle at both ends: trading, running my restaurant business, taking care of the house etc., etc. – all in addition to keeping the site up to date!

What many may not realize is that trading options is not the only way I make money in the stock market. I also invest in mutual funds, IRA’s, and of course individual stocks. I try to fund these other investments with my options-trading profits. I spoke about this concept when I posted about my “Gift Account.”

I get many messages from readers thanking me for what I do. They explain that with a full time job they don’t have the time to be options traders. And some don’t have the money to risk. However,  all hope to use the knowledge when options trading better fits into their life.

As I mentioned above, I am expanding the scope of the site. I’ve decided to take my strategy of buying stocks with profits from my options-trading and making it a major part of Main Street beats Wall Street. Of course, this does not mean that YOU have to be an options trader to invest in stocks. I may use  funds gained from options-trading to invest in stocks, but you might get your investment funds from other sources of income. Not everyone has the time or the knowledge to be traders, but many still want to be investors. I think my new Wealth Builder section can help many people get started investing, even if it’s with only a small amount of money.

The question is, “When it comes to buying stock, what do I have to offer?” This is where my Wealth Building strategy comes in. Let me give you step by step instructions on how my system works.

Wealth Building Strategy

• I make my money trading options. I believe in doing 3 things with the profits. 1) I take some profit as a salary, to help sustain and improve my lifestyle. 2) I leave some profits in the trading account to trade with and let my trading account grow. 3) I take some of the profits and invest in great stocks.
• The stocks that I’ll be buying for my Wealth Builder Portfolios will be heavily investigated. We’re not throwing darts here! Not with my money, and not with yours! Please read the pages “Stock Buying Criteria” and “Stock Analysis.” After much research the stocks chosen will be placed in one of my portfolios as stocks or LEAPS Options.

5 Star Trading Portfolio

• Certain  stocks I invest in and give a “Buy” rating to, will be held shorter term (weeks, months, but possibly even  years), as long as they are moving up without hitting a very strict sell point that is preset with a Trailing Stop Order.
• These stocks will also have gone through fundamental analysis, but technical analysis criteria will also have to be satisfied when studying the candlestick chart, moving averages etc, and investigating certain chart patterns. The stocks that pass this test will be placed in a portfolio called the 5 Star Trading Portfolio.
• The stocks bought for the 5 Star Trading Portfolio will have a Buy rating. A Trailing Stop Order will be placed at 20%. If, or when, the stock is up 10% from the purchase price, the Trailing stop order will be moved to 25%.
• If a stock with a “Buy” recommendation pulls back to within 5% of my protective stop, I will move the stock to a “Hold.” If the stock resumes its upward climb, I will move it back onto my “Buy” list.
• If the stock goes down to the Trailing Stop price the stock will be sold by me and changed to a “Sell” rating.

Pillar of Strength Portfolio

• Certain stocks will be selected and  placed in the portfolio I will call the “Pillar of Strength Portfolio”. These stocks are meant to be held as long-term investments, as I believe they will have long-term growth. These stocks will be held through the ebb and flows, as long as the stock is beating the analyst earnings estimates and moving in an upward trend.
• The Pillar of Strength stocks will not receive a Trailing Stop when purchased and placed in this portfolio. These very special stocks will go through very rigorous  research which will consist of fundamental analysis. After the fundamental analysis, each stock will have to meet certain criteria, in order to be included. Please read the  “Stock Buying Criteria” page of this section, Wealth Builder.
• Each position in the Pillar of Strength Portfolio will have a “Buy” rating. They will only lose their “Buy” rating if their quarterly earning report is 20% below analyst estimates, they receive multiple down grades, or I feel their business model has changed for the worse in some fundamental way and the company no longer fits into my stock buying criteria. If any of these happen I’ll give the position a “Sell” rating, or I’ll place a “Hold” rating and a Trailing Stop Order will be placed to protect gains. I will constantly watch these stocks to make sure they deserve to be a Pillar of Strength Portfolio stock.

Double Dipping Portfolio

This portfolio will hold very good stocks that also pay high dividends. These stocks will also have to satisfy my stock buying criteria. And satisfy both fundamental and technical analysis.

• These stocks must have a long track record of paying dividends.
• Also, these stocks must have a long track record of increasing their dividend.
• The Double Dipping stocks must maintain a “Buy” rating. They will have a 20% Trailing Stop Loss order placed on them at purchase. If the stock’s price increases by 10% the Trailing Stop will be changed to 25%.
• The Double Dipping stock will lose their “Buy” rating if the company removes or reduces their dividend.
• All dividends will be paid in stock shares and not cash. I will also sell Covered Calls on these stocks. Additional shares will be bought with the premiums I receive. I will receive a dividend on the original shares I buy, plus on the shares I receive as dividends and “premium shares.” Hence the name Double Dipping!
• After my original purchase I will not invest additional capital into these stocks. The positions in this portfolio will grow from additional shares as dividends, shares bought from premiums and hopefully the stock moving higher in price.

Stock Alternative Portfolio

My Wealth Builder section will also have a portfolio holding Long Call Options. This section will only consist of LEAPS options. These long-term options that I buy will be put into my  Stock Alternative Portfolio. Please read my page titled LEAPS. It’s located in the sidebar under Educational. Pay special attention to the paragraph labeled “Stock Alternative.”

Many times stocks can be very expensive. In these situations, I love to use LEAPS as stock alternatives. I can control much more stock than I can afford if I was simply buying them outright in cash, by purchasing LEAPS. I can buy LEAPS with Expiration Dates that extend out 2, or sometimes, 3 years, at a fraction of the price of buying the stock.

Let me give you a real example. Today, as I write this, Microsoft is selling at $146 per share. If I want to buy 1000 shares of Microsoft, it would cost me $146,000. If I want to buy 10 contracts (1000 shares) of the Microsoft LEAPS with the Strike Price of $145, expiring on 1/21/22, the premium is $21.95. This means I can control, by having the  right to buy 1000 shares, at any time up to 1/21/22 by purchasing  a 10 contract option for $21,950. If I wanted to exercise my right to buy the 1000 shares, I would have to buy the stock at the market price (in addition to spending the $21,950). I would never do that. Instead, I would simply sell the LEAPS option for a  higher premium. If Microsoft’s stock went up, and at a later date the $21.95 premium went up to $31.95 (which is very possible), the option owner would gain a profit of $10,000. This is a real deal! This is why I call this a “Stock Alternative.” It’s a great alternative to buying stock.

What stock options will be bought for the Stock Alternative Portfolio?

• Most likely options of stocks that are already in the 5 Star Portfolio or the Pillar of Strength Portfolio.
• Stock options where the stocks are too expensive to own in large amounts. If a stock is too expensive, and I don’t have the funds to lock them up for a long time period, I’ll buy a LEAPS option and put them in my Stock Alternative portfolio. Hopefully this will be in addition to owning the stock, even if the stock amount is small. If I cannot afford the stock it’s possible I’ll only own the LEAPS option.

These LEAPS options in the Stock Alternative Portfolio will also receive a Buy, Hold or Sell rating. As time goes by the options in this portfolio will get extra attention because Time Decay can come into play.