It Finally Happened!

Last week, members of my Real Income Trader premium service closed out a 162% gain. It took a little less than five months. That's pretty good...

Now, I've heard from Wealth Daily readers that you get a little tired of hearing about the gains made in our subscription services. It's understandable — there's no reason you should be jumping for joy that somebody you don't even know made a 162% profit. But the fact is, you, the Wealth Daily reader, were invited to buy the stock, too.

On March 30 and again on April 13, I told you about the stock Real Income Trader subscribers were buying.

The March 30 article had the very subtle title "Buy this Biotech." In that article, I told you:

On Monday [March 28], I recommended one such biotech stock to my Real Income Trader subscribers. And I thought you might be interested in hearing about it...

The company is Relypsa (NASDAQ: RLYP). On Monday of this week, my Real Income Trader subscribers were buying shares of Relypsa between $12.90 and $13 a share.

There's always a point where a company's valuation has taken into account whatever negative news is plaguing the stock.

In Relypsa's case, I think that happened Monday...

So bottom line: If Relypsa can even get close to sales projections for Veltassa, it will be much, much higher than it is today. And there are many reasons to believe Relypsa can easily meet sales projections. The drug is very effective, and doctors are prescribing it a lot — the number of prescriptions doubled from January 2016 to February. That kind of traction suggests that the drug is being well received.

Relypsa looks like a pretty good biotech stock to own. My Real Income Trader subscribers got it around $13 on Monday (and the gains in three days have already paid for their subscription fees), and you've got a shot at it around $14.

Then on April 13, less than three weeks after I gave you the tip on Relypsa, I wrote to you again after the stock launched above $24.

On April 7 (which happens to be my son's birthday), Relypsa opened at $14.40. And yes, I was pretty pleased that the stock was doing well since I recommended it to you. But I was in no way expecting what was about to happen...

At 12:35 p.m. Eastern, Reuters news service published an article that Relypsa had hired an investment bank to help it sort through the slew of buyout offers it was getting. Fifteen minutes later, the stock was over $21 a share. It finished trading that day at $24.32.

Relypsa had launched 68% in just a few hours...

I'll tell you straight out: There is no trading system on the planet that can give you consistent, one-day 68% gains for a stock. This big move on this particular day was luck, pure and simple.

But the fact that I had just recommended the stock wasn't luck at all. Like I said, I'd been watching the stock for months. I knew there was value and big potential for Relypsa's drug sales. So it's not at all surprising that I wasn't the only one who knew this.

Ultimately, from the day I recommended Relypsa at $13.44 to the closing price of $24.32 on April 7, the stock jumped 80%. I sure hope you caught some of that move.

But if you didn't, I'll tell you this: the stock's not done. I can't tell you the exact timing, but any buyout offer for Relypsa will be in the $30s or maybe even the $40s.

Please note that last sentence. Because Relypsa did indeed just get bought out. On Thursday, Relypsa revealed that it was being acquired by one of its partners, Swiss pharma company Galenica, for $32 a share.

Why Am I Telling You This?

Now, if you did the math — $13 to $32 — you discovered that it comes to 146%. So why did I tell you that Real Income Trader members made 162% on our Relypsa position? It's because the "Income" part of Real Income Trader refers to the cash income we take from selling covered call options...

So we made an additional $2.15 a share selling covered call options against our position. That boosted our total profit to 162%.

Do you know about selling covered call options?

With call options, you can make consistent money by simply selling the right to buy stock you already own — at a higher price than what you paid! (When you sell a call option on stock you already own, it's a “covered” call because the obligation implicit in the call option contract is “covered” by the stock you already own.)

So, when you sell call options, the buyer pays you, and cash is deposited into your account in a matter of minutes.

That doesn't sound very risky, does it? But many individual investors can't see past the risk of buying options, and so they miss out on this great source of income.

Here's how that worked with Relypsa...

I always recommend that members buy 1,000 shares of stock for covered call trading (and I always pick stocks between $5 and $15 to make it easier). So for Relypsa, that would be $13,000 for 1,000 shares of stock. You can sell one covered call option for every 1,000 shares of a stock you own.

The first time we sold Relypsa call options, we sold 10 of them and took in $1,000. I'll tell you, it's pretty cool to watch that $1,000 in cash hit your account. And that money is yours — you can transfer it to your checking account and spend it, or you can buy more stock.

The second time we sold call options, we took $1,150 in cash, for a total of $2,150 from just two covered call sales. We were making money whether the stock went up or not! It's kind of like taking your profits in advance...

And the thing is, you can keep selling covered calls again and again, taking more cash each time. There are a couple stocks in the Real Income Trader portfolio for which we have taken over 50% of our initial investment in cash. And of course, we still own the stock.

Steady Income from Covered Calls

Selling covered call options against stock you already own is a great way to boost your profits by 32% or more — each and every year. And covered call sales are deemed so safe that you can do this in any self-directed IRA account.

And you never know — the next stock I recommend for covered call trading might be another Relypsa and turn into a 162% winner in just a few months. If you're interested, here's some more information about Real Income Trader.

Until next time,

Briton Ryle

@BritonRyle on Twitter

An 18-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He also contributes a weekly column to the Wealth Daily e-letter. To learn more about Briton, click here.