Today we’re speaking with AIM Investing & Options Expert Jeff Weber of jjjinvesting.com
Jeff gives the best and most thorough explanation of options I’ve ever heard. He’s also an author & expert in the AIM investing method. Find out more in the podcast, video and blog post below…
Transcript of Our Interview Below….
Host Renee of the QuotersCast: So Jeff, I appreciate you being here, and I’ve got a little intro that I’d like to read because I find this, quite fascinating. So I’m speaking to Jeff Webber of JJJinvesting.com. You’ve written four books, one of which called AIM For Millions With Stock Options. A friend of mine actually just started trading options, so, I’m curious to see what you have to say here because you’re also an expert in the AIM investing.
Jeff Weber of jjjinvesting.com: Which is a contrary investing method invented by a wonderful gentleman named Robert Lichello in the 1970s. Now, back then, he used it with stocks because you didn’t have long-term options, which is what I use for it now. I’ll explain a little later how that works, but, as I tell my investor friends, the only way to invest is to be a contrary investor, because otherwise how can you buy low and sell high if you don’t buy low to start with?
QCHost: Well, I think a lot of people would agree with you. I think what stops a lot of people though, is that they don’t understand how to do that, so what have you figured out the rest of us haven’t?
JW: Here’s what I figured out, okay. The enemy of all investors is emotion. So you need logic. Well, Mr. Lichello has a method on a simple 8 by 11 piece of paper with 11 columns which shows you exactly when to buy, when to sell and how much to buy yourself, so it completely takes emotion out of it and… just a quick explanation of what I do. Let’s say you bought an option for $10, or you have to buy a contract, which is a 100 options… Well, I recommend you start with 15 contracts. Let’s say you set up the spreadsheet and you initially buy 10 for the option, I figure out at the bottom of the option when your next by should be and for how many more contracts and when your next sell should be, and in essence, think of Goldilocks in the middle, you don’t want a price that’s too high a price or too low, you want prices that are just right. So if you buy it at $10, I have found from years of experience, a great place to buy is about 25% lower than your original price. So if you bought a $10, I’m gonna tell you your next by is going to be maybe three or four contracts at $7.50 cents, and then the same thing with the sell, if you bought a 10, you wanna sell price is 25%, 30% higher.
So let’s say we set up a sell price at $13, so you look at the bottom of your spreadsheet, you’d see, I have a bye for four contracts at $7.50 can hopefully, if the price goes up, I have a sell at $13, I’m making a 30% profit. If I sell at $13, well, then all you have to do every day, you check, I recommend you check at the end of the trading session when the market closes, and you see it hit one of those crisis now, to make sure you never miss it by yourself, I advise all my clients to use limit buy and sell prices. What does that mean? That means the stock broker has your buy and sell in their computer and they will automatically be executed if you get one of those two prices, the advantage of that is that, like I told you, you put in a sell at $7.50 with a limit buy. Two things can happen, both of which, you’re good, you’re gonna… The buy you wanted at $7.50, you’d never contain more, but the bury of the limit by is if the stock is having a bad day and the price goes below $7.50, you might wind of buying it at $7.25 cents or $7.00, so you get it at an even lower price, right? The same with the sell.
JW: You might get to sell at $13, but you might get it in $13.25 or $13.50, and limit orders stay open an average of two or three months, depending on the broker. So, I always advise people, make sure you keep a calendar when they’re gonna expire, so you make sure you renew them if you’re not… But the beauty of it is, now you know, by is four contracts at $7.50 and my sell $13 for say, four contracts. So you’re taking all the trouble out of investing of knowing when to the buy and when should I sell. I taught a class on AIM investing many years ago at Ramstein Air Force Base in Germany. I love helping airmen and soldiers, I worked for the army for 35 years, so I got to live overseas 17 years, and I really enjoyed trying to instruct and help the young soldiers and airmen Get Started financially investing, because while in military may be a great career, it’s not a great way to make a lot of money that you’re gonna be able to… The life you want with… So I used to start my class by always asking people, does anybody here own any stocks, and a few hands would go up, and I’d say, Well, if you can’t tell me when you should buy, when you should sell, or when you should do nothing, then you don’t have any business owning those stocks, because you don’t have any sort of an investing method that I will make you a consistent profits, even when I was young, I would haut used book stores, and that was actually very helpful I found Mr. Lichello’s book, and I thought it was such a good way to invest that not only would I wanna use it for myself, but I wanna share it with as many people as possible, and other quick thought is, okay, right now we’re in the middle of a pretty bad bear market, people would say the prices are way down.
JW: Not totally true, ’cause the NASDAQ is way down, the Dow Jones stocks are not as way down, but when I came up with the beauty of aim is that It invests in long-term options… Okay, well, long-term, often simple leaps is just simply a way of describing options that expire the third Friday in a January and have more than one year before they expire. So right now, I have all my clients in January 2025 options. Okay, let’s go have roughly two years before they expire…
QCHost: Yes. Can we back up just a little bit, Jeff? Because I think some people may not be fully cognizant of what AIM is.
JW: So it’s an acronym for Automatic Investment Management. And here’s the way AIM basically works. You start with, let’s say you started with $20,000 and you’re gonna buy one option or leap. You start by taking half of your money, $10,000, and you’re going to buy the option, the other $10,000 is in a column that’s called Cash, very simply. So you’re starting with $10,000 cash, $10,000 leaps, you always want to have money to buy, if the price goes down this way, you’ve taken care of it. The key to AIM is this, so you started with $10,000 worth of options.
JW: You started with what is called the portfolio control number. That number is equal to your starting leaps a mouth, so if you start with $10,000 worth of leaps or options, the control number is 10000. And then all you ever do daily, weekly, monthly, preferably daily, you compare those two numbers… So here’s a way to think of it, Okay, if you started at 10000 and you brought your option to 10, well, let’s say your option went to 15 and that can happen. Well, then when you look and see the value of your options had gone from 10000 to 15000, it’s gone up, you’re comparing the two numbers and you say, Which number is higher? 15000 for leaps or 10000 for portfolio control. Well, obviously, the leap number is higher, so you put the leap number on top and you’d go 15000 minus 10000 portfolio control AIM wants you to sell 50000 worth of options because they are now profitable. Now, the Lichello came up with a great idea, and what he does in the column next to the value of your leaps, is a column called Safe. Safe is always 10% of the value of your leaps. So in the previous example, you would subtract the 15,000 leaps value from the 10,000 portfolio control number, and AIM would give you a sell price of 5000.
JW: Okay, well, then what you do, which is very clever, is you take the Safe amount, which is 1500 or 10% of the 15000 and you subtract it from the 5000, so you go 5000 minus 3500 of minus 1500, and AIM gives you a market sell order for 3500 worth of options. Why do you wanna do that? Why do you wanna hold some back? Very simply, because trends tend to continue. So I’ve had many times when somebody held back the 1500 because from the sell when the option went to 15, every time we have a buy or sell, so we come up with a new buy and sell at the bottom of the spreadsheet, and then a week later, the option goes to 20 or 25, and we sell at the higher price. So the 1500 we held back and didn’t sell at 15, we’re selling later, weak or two later for 20 or 25, so we’re making even more profits.
QCHost: Right. So why do you think this technique, which clearly has been very successful for you, why do you think it’s not better known?
JW: Simply, there is a vast prejudice against options in general, if you do a study, you’ll find only 10% of investors only even own an individual stock the rest mutual funds, etfs, whatever. And when you get to the option portion, less than 1% of all people own an option, no professional financial advisor will ever recommend buying options to a client and to give you an idea of how prejudice the industries is against this… Edward Jones, the big nation wide investment company, they refuse to sell options to anybody.
QCHost: Is that a lack of understanding? I’m sorry, I didn’t mean to interrupt you. Jeff, do you think it’s mostly a misunderstanding just because they don’t understand. That it’s a misunderstanding.
JW: Because there’s a widely circulated rumor that well… all options expire worthless. Okay, well, the reason for that is because the vast majority of options are sold that expire in a week or a month, and they’re bought by people from covered call sellers. I don’t know if you know what covered call sellers are. Let’s say you own a thousand shares of the stock, you could sell 10 contracts for a month, say it was worth $25, you sell it in$ 27. Some speculator will buy those contracts and hope the price goes way up in a month and you’ll make money. Well, those expire worthless about 90%-95% of the time, so it’s like an income for the person who’s selling the stock… What I teach you has nothing to do with that. I am selling you long-term options, you never have to worry about them expiring because what I do with AIM is this… Right now, I have everybody in 2025 type options. That means to expire January 17th, 2025, and guess what? Come September of this year, the 2026 options come out for AIM. So what do I do? I tell people and they come out in September, I tell them in October, November, we’re gonna roll over to the 26 options.So you never have to worry about your option expiring because you’re rolling it over with more than a year before it’s gonna expire, so you don’t have to worry about the evil enemy of options, which is called time decay, because all options has become worthless if you hold them to the day they expire. So we’re rolling them over to the other options, my sooner, and we never have to worry about time decay. So right now, like I said, I just… I’m still in the process of rolling people over from 24 to 25 options, and the beauty of it is, like I said, to me, an option like a good stock, is as safe as the stock itself. Do you think Apple options are not gonna be safe and an Apple stock is going to be safe? Of course not. Then both safe as ever, and why do you wanna do options instead of stocks?
I’ll give you the perfect example. Like my other book called Here Are The Customers Yachts is based or using AIM with the Dogs of the Dow. All the Dogs of the Dow are are the 10 Dow Jones stocks out of 30 that pay the highest dividends. Okay, that’s been a tried and true method of making money for years using the Dogs of the Dow, and guess what? All the Dogs of the Dow have leaps. So I was curious, I said, I want a contrast, how AIM would do with stocks compared to how it would do with leaps to show people why you should be doing it with options and not stocks. Well, in eight years, the Dogs of the Dow stock portfolio using AIM, it’s up 15% in eight years, so it’s averaging maybe the 11% a year, most people would be very happy with 11% returns in over eight years. Well, contrast that with how aim is doing with the Dogs of the Dow leaps, that portfolio in eight years is up 550%. So would you rather be at 100% or 550% when the risk level is the same? So it’s a no-brainer to me. You wanna do options because they’re five or six times is volatile as the stock, and why wouldn’t you… I’ve had many people are starting, oh my God, I’m in my 50s, I need to do to something for retirement. This is the perfect way to catch up for all those years you didn’t have any investments out there.
QCHost: That’s an excellent point.
JW: They can explode, I had one guy in 2020, and he had to have a colonoscopy. He had terrible problems, he had colon cancer , but I won’t go into it, but he started with $550,000 in January of 2020. At the end of December of 2020, that 550000 had grown to $1,750,000. So He made 1.25 million in 2020. That’s the year of covid, massive layoffs, factory shut downs and massive unemployment.
So you basically have to ignore the economy in the world around you when you’re investing, and that’s why I tell people, you always wanna be in… I’ll give you another quick example, I had one guy who got into what I call the AIM Hall of Fame, because I love to use sports analogies, and so I came up with the term the AIM hat trick. Whenever somebody has three straight sells on their leaps without being interrupted by a buy, and to do that the leap has to at least double. Well, I had one guy, he’s in the Hall of Fame. Because he pulled off the AIM hat trick in one day. He had three sells in one day on his American Express leap in the morning. He told me in the morning, Hey, my leap, I have to sell. So luckily, he caught me at a good moment, I immediately updated his spreadsheet, which only takes five minutes, and once you learn how to do it, it’s just repetition, never mess with Greeks or anything sophisticated. If you can do addition, subtraction, multiplication, and division…You can do AIM.
So I updated this spreadsheet. Then he sent me an email around lunch time, I had a second sell. I said, Oh great, and I kind of forgot about it. Well, at the end of the day, when the market closed, he sent me another email and said, Hey, Jeff, I had a third sell, I did the third sell myself in one day. His American Express leap went from $3.50 to $12.50 in one day because of a quarterly earning statement. So you see the volatility, and that’s what you’re taking advantage of. Now, when you have a bear market like we’re having now, I have sophisticated adjustments to buys to make sure you will never run out of cash. I’ll give you a quick example. Say you bought that option to $10… Okay, you had your first buy at $7. Okay, I refigured your spreadsheet, and the next one I would probably tell you you’re second buy is to $5 as your original price. You make that fit.
Okay, well, now the cash has maybe gone from $10,000 to $6000 well ’cause that’s where the money came from, to buy. Once you made that second buy at $5, I’m gonna invoke my bear buy strategy. What’s the difference? Well, your third buy is gonna be half of your previous buy, so you bought at $5, your next by is gonna be at $2.50 where you load, and you’re only gonna use one third if you’re remaining cash. So, 1/3 of $6000 is $2000. You make that buy… Okay, let’s say that buy happens now you’re down to $4000 cash, you own a lot more contracts, you’ve greatly lowered, your break-even point is nowhere near $10 is probably near $5 or $6 right now. Okay, so if you made that buy at $2.50, I’m gonna probably invoke my Super Bear Buy strategy. What’s the difference? Okay, well, half of $2.50 is $1.25. Well, I’m gonna tell you, don’t buy it at $1.25, we’ll lower it to one dollar. Now you’re gonna use one third of your $4000, which is roughly $1333, so you’re gonna buy another 13 contracts, so you can see… you originally bought 15 at $10, now you’re buying 13 at $1, can you see how that greatly lower your break-even point? And the perfect example, and here’s the only way somebody can fail it AIM…
I had a guy from New York investing his IBM. His leaps went from 20 down to 2. Okay, that can happen. But we were managing it and doing fine. So I told him you have a buy for 20 contracts at $2. He ignored me. Bad mistake. Okay, it’s dropped even further to a $1.60. I wrote him again and said, Hey, because it went down to a $1.60, you can buy 25 tracks on 20… Ignored me again. Well, that was a big mistake on his part. Because three months later, IBM was up to $4.50. If he had made the $1.60, he would have been profitable at $4.50 even though his original investment was a lot higher. Right? So I’ll give you another sad tale of woe about how powerful options can be. I have this guy who’s supposedly a smart man, ’cause he had a PhD in psychology and he’s a therapist, well, he was helping his girlfriend managed her money, well.
JW: She started with $67,000 in Facebook leaps. Meta now. Well, her leap went from $13 down to $2… I sent her an urgent buy… Well, he decided on his own without consulting me, ’cause he is too emotional, can handle investing… He sold everything from himself and his girlfriend, so her $67,000 resulted in a loss of $50,000 cause she only got back $17,000. Well, I save all the old spreadsheets for people in my file system, and I happened to stumble upon that spreadsheet about a year later. Well, I noticed the leaf was still active, it hadn’t expired, and I was just curious, I wondered how her Facebook leap had done in the year since she sold it. Well, that leap had gone from $2 to $73, I figured if she had done nothing and just forgot about it… her $67,000 would be worth $273,000. And so I see this over and over, and I try and pass these lessons on to my investors who don’t have the 35 years of experience that I do with the options, and AIM investing and show them that, don’t worry about what it’s doing today, next week next, whereas that option, you gonna be five or 10 years from now…
QCHost: Right, okay, this is great, this is excellent. We only have a few minutes left, Jeff, and this has probably been about the best explanation I’ve heard about options ever, and I think you can… Yeah, this has been really excellent. So if people wanna get into your program, if they wanna learn more about your system, where is the best place to go from here?
JW: They can go to my website, JJJinvesting.com, and you can get a copy of my Free first book I’ve written, like I said, four books, I give the first one away for free, other ones I sell at modest prices, you can find information on buying any of my books at my website. I love to help people, I’ll give anybody is even welcome to phone me. I’ll give you my phone number up.
It’s 2-1-0-4-7-8-0-6-5-5. <—- Jeff Weber’s Cell # – Call Him!
I would be happy to talk with you about it. I’ve got many articles I can send you, and like I was saying earlier, the beauty of AIM and using options is you can make money in both bull and bear markets. How do I know that? Because I remember one of my model portfolios went down a tremendous amount in September last September, and it was with calls…
Well, calls make you profits when the stocks go up, but there’s a way to make a profit when stocks go down, and that is by owning puts instead of calls. I back tested my model portfolio that fell, like 500%. Because in 16 years, it was up 2500% and it fell to 1900% at the end of September was still up more than 100% a year, not bad. And so I tested it by putting puts in, ’cause there’s a way to look up how a put or an option has done on Yahoo Finance and so what my back testing is from October of 21 to October of 22, using puts, the AIM portfolio gave 91%.
So there’s a way to do it in the bull or bear markets. And just one quick note, the last thing there, with the market was the financial meltdown in 2008 and 9. Okay, to give you an idea. The Dow Jones fell from 13000 to 6500 in 2008 and 9. Right now, even to despite the current fair market, it’s at 34000, which I view as bullish going from 6500 to 34000 in 13 years. Plus I looked up… I was begging people to buy stocks and leaps back in 2009. To give you an idea of how prices can change, American Express was $11 a share in 2009, 10 years later it was $91 a year. Boeing was $32 in 2009, 10 years later, it was $360.
QCHost: Wow.
JW: Everything at the average stock I was recommending In Marmara 9 went up an average of 700 to 800% in the next 10 years. And based on historical experience, their markets average for 13 months, the current one is going on for 13 months, it’s due to end soon. On average, it takes 27 months of total for stock prices to return to where they were before the start of a bear market. So we don’t have that much longer to wait it, and historically, about 55% or 60% of the time, the stock market is bullish, the other 40% of the time, and we’re either bearish or going sideways. So long time, you always wanna be in Polish or in call, but short term, I could see you getting puts and I work with… With all my experience, I can help people decide. I’ve got people with split portfolios, they have two calls, two puts. But let me warn you on certain options, they can really go down… But miracles can happen.
Had one guy bought JD and it went from $14 to .58 cents a book. Well, I told him, I said, It’s so low, but you had gone to owning 15 contracts, to owning 145 contracts. So I told them, I said, Our only hope is a miracle when you don’t even have enough money to roll it over to a 25, let’s just put into ridiculous sell price for all 145 and see if we get it. So he chose when it was 58 cents, he put in to sell at $3.50 for all 145 contracts. Well, the Chinese government said some nice things about JD. And within a week, we got that $3.50 cent price and he sold everything, made a quick $27000 profit and got back to even on that option. So it’s never hopeless with options, because they can move so quickly. I’ve had options go up a 1000% in a week, so… I tell people, that’s why you always wanna be in the game. All new options as like a mega millions ticket that never expires, you gotta hit the numbers one day.
QCHost: That’s excellent, I love it. Well, thank you. I’m afraid we’re gonna get to cut off here, but this has been a very informative, Jeff, and I appreciate your time and your explanation, and I’ll let you know when this is out, and so thank you very much.
JW: I’m happy to send you my free book, and some of my sample newsletters.
QCHost: I would love that.
JW: And anybody who becomes a client of mine gets my newsletter for free, it’s 150-page year.
QCHost: You’re very generous.
JW: Just go to that website and tell me you want the book and it’s on its way…
QCHost: Alright, JJ investing dot com. Thank you. Thank you. Alright, thank you. Yeah, have a great day.
QCHost: Send me a link when you got this posted somewhere and I’ll tell my friends so much…
JW: That’d be great. Yes, I will. Thanks again, so much for that.
END OF INTERVIEW
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