Trade Alert: Income from Accumulation

What’s in It for You? 

CubeSmart (NYSE: CUBE) is one of the largest self-storage real estate investment trusts (REITs) in the U.S.

The recession-resistant industry does well during downturns because people on the move need places to store their stuff until they get settled again. Now, these same folks may be on the move again, as a resurgent economy creates new opportunities. At the very least, they should be able to afford higher rents.

Until recently, the recovery since the downturn has been slow and halting, giving self-storage REITs a nice tailwind. Of course, that also led to an increase in supply, which the industry will continue to work through over the next year or two.

That means CubeSmart’s heady growth in funds from operations per unit (FFO) is expected to slow to the low- to mid-single digits over the next couple years as local markets absorb the additional capacity.

The good news is that CubeSmart’s management is pretty disciplined on the financial front. The REIT plans to fund its existing development pipeline over the next two years by using free cash flow instead of issuing more equity. And CubeSmart ended the year with net debt to EBITDA at 4.74 times, well below its average REIT peer.

Meanwhile, the shorter durations of self-storage leases allow owners to increase rents at a pace that should keep up with any rise in inflation.

This trade will generate immediate income of $35 per contract now, with the possibility of buying this REIT at a 9.7% discount to where it currently trades if the stock gets put to you. Investors should set aside $2,500 per contract sold to buy the stock in case the option expires in the money.

Regardless of how many contracts you sell, it’s absolutely critical that you follow the instructions below, particularly when it comes to setting the limit order.

How to Make the Trade:

  • Trade: Sell to open the May 18, 2018, $25 Put on CUBE.
  • Allocation: Sell one put for every 100 shares you would be pleased to buy at $25 per share.
  • Prices:
    • Current Stock Price: $27.70
    • Limit Order Price: a credit of $0.35 or more.
    • Tell your broker: “I want to sell a put on CubeSmart (NYSE: CUBE) stock. Specifically, I want to ‘sell to open’ one May $25 Put for a credit of $0.35 per share or more.”
  • Further Instructions Regarding the Trade:
    • If the option price changes, you can adjust our recommended limit based on the midpoint of the bid/ask spread, which you should be able to see when entering the trade. Just make sure the potential credit is at least $0.35 per share or more.
    • Place your limit order on a “good ‘til canceled” (GTC) basis and be patient.

The Win-Win Situation: 

For every put contract you sell, you will collect $35 that’s yours to keep no matter what happens in the future.

If the put expires worthless, meaning the stock price is above $25 per share at expiration, then we’ll do another trade to create another instant payment.

If the stock is trading at or below the strike price upon the contract’s expiration, then you’ll be buying this REIT at a 9.7% discount to the current market price, while locking in a yield of 4.8%—plus the premium you pocketed when you sold the put.

Then we’ll collect the dividend while creating more instant payments by selling covered calls against the stock.

Stock Talk

Padman Menon

Padman Menon

My trade was canceled at tdameritrade because I didn’t have 25 k to back up the trade. I had only 23.5 k in the account. If it his is the case how do we makemltle trades? I wanted to buy ten contacts. And how we can grow this account unless we have enough supportive back up money in the account.
How many recommendations weekly?

Ari Charney

Ari Charney

Hi Padman,

If you’re selling cash-secured puts, then you need to keep the cash in reserve to buy the stock in case it gets put to you.

The puts we sell typically expire in three months or less, so if the put expires worthless then you’ll be able to use that money again thereafter.

The put in Friday’s trade, for instance, expires in just 70 days.

Even if the stock gets put to us, that money will still be productive since we’ll be collecting a dividend while selling covered calls against the stock.

For an account of that size, it might be best to start by selling one contract per trade. That will allow for some diversification since we have about three or four trades per month.

Diversification will help limit the possibility that all of your money gets tied up in one trade or one stock (if it gets put to you).


Bashir Lalani

Bashir Lalani

hello Ari,
the trade on CUBE did not fill today (I got this alert late on Friday). should I continue SELL TO OPEN PUT FOR THE NEXT COUPLE OF DAYS, if so when is the trade valid through till?

Ari Charney

Ari Charney

Hi Bashir,

Trades are generally valid for a week after they’re published, as long as you can get the minimum credit specified and the strike price of the put remains at a discount that’s in your comfort zone.


Bashir Lalani

Bashir Lalani

I am also aware that CUBE will be my first trade with you (presuming it will get filled on Monday).
CUBE has not filled yet!
If the EPD trade is a typical trade, and to generate a larger income, one would need to trade more contracts. Collecting $40 premium on every put contract would mean $400 on 10 contract! And so on and on ……
But it would also mean setting aside $23,000 should the option expire in the money.

To generate a $Million dollar income, I see it will require trading lager # of contracts, am I not correct? Over what period realistically do you foresee that one will generate $1M in income as per your guarantee and/or claim? or am I missing out on some of your wisdom?

I am sure I will be able to generate income on future alerts.

thank you.

Ari Charney

Ari Charney

Hi Bashir,

I did see ten CUBE puts trade at $0.35 at Monday’s open. Since then, however, the stock has generally traded a bit higher, which has caused the price of the option to decline.

But given the market’s recent volatility, I wouldn’t give up on this trade yet. And another trade will go out later this week.

We discuss some of the assumptions made in the promotion in our start-up guide:

Doing cash-secured trades is best for beginners. Over time, however, experienced options traders can use margin to limit the cash set aside while potentially magnifying returns.

But since we’re not averse to taking ownership of the underlying stocks, it’s a good idea to have the cash necessary to buy them just in case.

Remember that selling puts is just one way to generate income on these trades. If a stock gets put to us, we can collect its dividend while selling covered calls against the stock to generate more income.


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