For several years now, we’ve been telling readers how to use options to potentially generate thousands of dollars in income.

One of the methods we discuss the most is selling put options. That’s because we think it’s one of the best income strategies in the world. But don’t take our word for it… Some of the most respected investing gurus on the planet agree, like Warren Buffett, David Einhorn, and Joel Greenblatt.

Another one is Jeremy Grantham. While Grantham may not be as well-known as Warren Buffett, but he’s a well-respected name in finance. Grantham is a noted value investor and “permabear” on Wall Street. He’s also the cofounder of GMO, a private investment firm with more than $71 billion under management. And lately, Grantham and his firm have turned to selling put options to generate market-beating returns.

In a letter to clients a few years ago, the co-head of GMO’s Asset Allocation team wrote about the firm’s strategy, saying:

“Is there any kind of diversification you can get excited about? We believe there is. One clear example, which has made its way into our multi-asset portfolios, is equity put selling.”

Why was this a big deal?

For starters, GMO is a value-based investing outfit — not a flashy hedge fund using risky strategies to try and beat the market. And the fact that they’re “excited” about it should be more than enough to get the attention of conservative investors.

Grantham is also known for providing detailed market forecasts. He is described by some market watchers as a “permabear,” because he almost always expresses his skepticism about the market and asset prices. But instead of telling their clients to simply expect lower returns, GMO sells put options to generate income.

How Put Options Can Juice Your Income

To recap, “put” options give investors the right — but not the obligation — to sell a stock at a specified price before a specified date. Selling a put obligates us to purchase that stock from the put buyer if it falls below a specified price (the option’s “strike price”). When we accept that obligation, we receive income upfront (known as a “premium”). You can be asked to buy the stock at any time between the moment you collect the premium and the expiration of the option contract.

Now, one thing you can do to lower the risks of trading is to only sell puts on stocks you would want in your portfolio anyway. So if we make a trade and the stock falls below the strike price, that’s okay. We’re buying shares of a stock we wanted to own anyway, and for a better price than it once was.

This is the same exact strategy Warren Buffett used to acquire his initial stake in Coca-Cola (NYSE: KO). The King of Buy-and-Hold first bought shares of Coca-Cola in 1988. At the time, Buffett said he expected to hang on to this “outstanding business” for “a long time.”

However, the world’s greatest investor is also a bargain hunter. If Buffett likes a company, but believes its share price is too high, he’ll wait until the market “cooperates”.

But the stock wasn’t correcting. So Buffett turned to options instead.

By April 1993, Buffett’s beloved Coca-Cola was trading at about $39 a share (before splits). That was a price he regarded as too expensive to buy more shares at the time. But did he let his cash sit idle while waiting for a downturn? Not a chance.

Buffett sold put options and earned $7.5 million in income — all without buying or selling a single additional share of stock.

Closing Thoughts

In the past few years, other mega-investors like Grantham took a page from Buffett’s playbook by using puts to earn extra income. But it’s not just billionaire investors who can use this strategy. Everyday investors like you and me can use it, too.

Forget what you might have heard about options. When done properly, strategies like this can be a valuable tool for individual investor. You simply have to be willing to learn.

That’s where our colleague Robert Rapier comes in…

Robert is showing traders how to print cash “on command” every time they trade, for up to $668 in weekly income…

By using one of the simplest strategies around, Robert and his followers are earning three times as much as they would with normal dividends (sometimes even 20x).

And for a limited time, he’s pulling back the curtain to show everyone how it works. Get the details here.