The "Pick Your Price" Trade

Did you know that there's a trade that not only allows you to name your buy price, but also helps you determine your return?

Don't expect many brokers to tell you about this one - it's a little-known "trick" that they'd rather keep to themselves as the commission just isn't worth their time. But there's no better time than now to dodge past them and lock in the gains that you want, rather than being held hostage by whatever the market dictates.

Even better... it doesn't require you to leaf through a stuffy textbook to show you how to do it. The details are right here...Two Trades... One Transaction

It's called a buy-write strategy - one that you use with covered call trades to ensure that you get the best entry price and, as a result, the best return, too.

The first step is to pick a stock that you like. Let's take blue-chip communications firm Verizon (NYSE: VZ) for this example. The company is one of the largest telecommunications companies in the world, with a strong presence in wireless communications, entertainment delivery and smartphone technology who should be able to sell the iPhone later this year.

When you execute a buy-write trade, you buy the stock and sell call options against the shares in one simultaneous transaction. Here's a step-by-step guide to your Buy-Write Battle Plan...

Right now, Verizon is trading for around $36 per share, with the July 2011 $36 call options trading for $2.

To execute a normal covered call trade, you'd place a buy order on VZ shares at $36 and then a sell order for the VZ options at $2 in order to get a net price of $34. But there are a couple of drawbacks...

It involves two separate transactions - and if the stock moves while you're getting ready to place the options trade, you may get less for the option than you hoped.  If you're using a strict limit order strategy, where you're looking for a specific cost target, you may be left in the cold.  And of course, the more volatile the shares are, the more the likelihood there is that you won't get filled at the price you want.

To combat this, you can use a buy-write, where the two trades are executed at the same time. 

Once you enter the stock and options symbols, plus the net debit price, the broker will then try to buy the stock and sell the option at your chosen price. And don't worry... the trade will not execute until your parameters are met - it's that simple.

So next time you want to buy a stock and sell call options against the shares at the same time, use the buy-write strategy. It's a great one to use if you're not in a hurry to get the trade done immediately, but are more interested in getting the price and return that you want from the trade instead.

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