^Strategy

This is not financial advice. Do your own research. Invest what you can afford to lose.

Insurance companies take on other people’s risk for a fee. We pay insurance companies to compensate us if our health, house, car, or business gets damaged by events covered in the policy.

Insurance companies make their profit by covering accidents that never happen or accidents that happen at a cost lower than expected.

We will create our own insurance company that reimburses stock investors IF the price of their stock falls. The insurance product we plan to sell is called a put option, and it guarantees investors that if their stock falls below a certain price, we will cover the losses below that price. The investor will pay us a fee, called a premium, for this guarantee, and our guarantee can be for days, weeks, months, or years.

For example, Larry Brown owns 100 shares of NVIDIA and each share is worth $100. Larry is worried that his stock might fall below $90 per share, so to calm his nerves, he decides to buy insurance from us.

We sell him a put option (policy) that says if NVIDIA falls below $90 within the next 45 days, we will buy his 100 shares for $90. In return for this protection, Larry agrees to pay us an upfront fee (premium) of $1 per NVIDIA share, which is $100.

• Each put option policy is called a contract. 1 contract covers 100 shares of stock. 

Larry now feels better because if NVIDIA drops below $90 within the next 45 days, he knows we will cover his losses below $90.

We believe NVIDIA will not fall below $90 in the next 45 days, so we feel good about the policy we just gave Larry.

If the stock does not fall below $90 in 45 days, we keep the $100 premium. If the stock falls far below $90, we lose money. We will explain in future letters how we plan to limit our losses on each policy to $300 or less by using put credit spreads.

Portfolio

Insurance companies don’t just sell insurance, they also invest in stocks, bonds, and real estate to generate additional income. Our company will also buy stocks and bonds for additional income. Sometimes we might buy stocks that don’t pay income if we believe they will generate income for us in the future. This will only be in situations where we believe the stock’s growth potential is enormous.

Our three sources of income will be:

1. Selling put options on stocks.

2. Buying stocks that pay us income (dividends).

3. Buying bonds that pay us interest. (We lend companies money and they pay us interest.)

Our insurance company will cover the semiconductor industry. Semiconductors, also called chips, are in most electrical devices. They power computers, cars, phones, airplanes, TV remotes, microwaves, hearing aids, and the list goes on. If the device has electrical power, a semiconductor chip is usually involved.

Below is a list of semiconductor companies we will monitor. Based on the situation, we might sell insurance to owners of these companies, or we might buy the company if they’re selling for cheap.

• AMD, Analog Devices, Applied Materials, Arm, Broadcom, Cadence Design, GlobalFoundries, Intel, KLA Corp, Lam Research, Marvell, Micron, NVIDIA, On Semiconductor, Qualcomm, Synopsys, TSMC, Texas Instruments.

Risks

Even though we are cautious investors who run across the street if we sense danger, we will have losses, and we will have wins. The semiconductor industry is volatile, and our investments carry significant risk. The goal is to make our wins outnumber our losses.

If someone says they have an investment strategy that is 100% guaranteed, they are either lying or they don’t understand the investment they’re making. Aside from Jesus’ salvation and the wisdom He gives, everything in life carries risk.

Only invest money you can afford to lose.

How Much Money Do We Need To Start Our Insurance Business?

It depends.

We will use put credit spreads to limit the loss on the policies we sell to $300. Ideally, we don’t want to risk more than 1.5% – 5% of our investment money on a policy. Based on this rule, we need $6,000 – $20,000 to start.

If you don’t have $6,000 – $20,000, you can still start with $300, but with the understanding that one bad policy will erase your entire investment money.

You can also practice by using the fake money investment platforms like Charles Schwab thinkorswim offers. They give account holders $100,000 of fake money to practice their investment strategy.

Click this link to visit their website: https://www.schwab.com/trading/thinkorswim/desktop

Only invest money you can afford to lose.

If you have any questions, don’t hesitate to email me at [email protected]

Until next time, stay strong, stay blessed, and God willing, we’ll see each other next week.

Genesis 12: A Faithful Wife: Watch Abram’s faithful journey into the Promised Land and see the unwavering devotion of Sarai, his wife, to her husband.

Visit www.makingitstraight.com to watch short films based on the Bible and to purchase tools to help evangelize.