I was at my local library doing my regular walk through of the personal finance section and the new Derek Foster book, Money for Nothing, caught my eye. As I was a fan of his previous books, I anticipated great things from this edition, so I quickly checked it out to be read later that evening.
About the Author
For those of you who are unfamiliar with Mr. Foster, he is the self proclaimed Canada’s Youngest Retiree. He is the author of 3 books, 2 of which I have reviewed already, Stop Working! Here’s How You Can along with The Lazy Investor. As you can see from my recommended book list, stop working is among my favorite personal finance books.
About the Book
Derek Foster’s newest book, Money for Nothing: And Your Stocks for Free covers a diversity of topics, but the main theme being to sell put options to generate cash flow. For those of you unfamiliar with options, here is a primer on how options work. When you buy a put option of an underlying security/stock, it gives you the “option” to sell the security for a specified “strike” price. Of course, for the privilege of selling your security/stock at the specified price, you’ll have to pay an option premium.
On the other side of the coin, if you sell a put option at a chosen strike price to an put option buyer, you collect the option premium and only have to buy the underlying stock if the option is exercised (most likely when the stock price goes below the strike price).
Money for Nothing emphasizes the strategy to sell put options on strong dividend paying stocks at a strike prices that are attractive. That is, the strike price where you would consider buying the stock anyways and collect the option premium. The key is to have enough cash in your account to cover the stock purchase should the option be exercised.
Along with explaining a put option strategy, Derek Foster also dives into explaining the pros and cons of leveraged investing. He gets into his personal story of using massive amounts of leverage to buy Philip Morris which, lucky for him, turned out in his favor.
Out of the three books, I enjoyed Stop Working: Here’s How You Can the most, but this one does provide a few new ideas that I will be looking into deeper.
Have you read this book yet? What are your thoughts?
- Four Pillars
- Canadian Capitalist
- Michael James on Money