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Posts Tagged ‘Call Yield’

How to Make $3,500 per Month Passive Income for Life

What could you do with $3,000 per month in passive income for life? How would it change your future? For some, it will be a total life changer to increase your income each month. For others, maybe not, but how would it affect your life if you had access to the plan that produced $3,000 per month for life?

It is clear that most people are not doing the single most effective thing that will make them rich: Investing in the stock market for passive income each month.

At Get Rich Investments, we focus on creating monthly income. We like to invest in securities that can produce 3-5% each month. One method to achieve this level of income is by trading covered calls. This trade allows the investor to sell a call option for premium income. Then, we buy a protective put to protect our downside from owning the stock.

The year 2019 turned out to be a stellar market advancement fueling significantly higher returns than 2018. Last year, Get Rich Investments had a total return of 18% compared to 10% for the S&P 500. This year, we did even better by not only trouncing the SPY but achieving an all-time high of 50% in our portfolio. The average monthly income across our open positions was nearly $200 for each position with 100 stock shares. If you own all positions (100 shares) you would capture $1,663 dollars of income per month. And, if you double up you can capture nearly $3,500 per month.

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Let us look at a couple examples, one of our better income producing stocks was Merck (MRK). Yes, I did say INCOME producing even though MRK has a modest 2.7% dividend yield. How did we turn MRK into a cash machine? Simply, selling monthly covered call throughout 2019. In total, we received $165 dividends for each 100 shares of stock. However, we earned a total of $2,180 in call option premium (13X the dividends). At yearend, our income yield (including both dividends and call premium) was 32%.

Tell me where else you can find a yield this high! We had over 8 stocks in our portfolio with this level of performance in 2019.

To get started, you can join the Monthly Income Plan that offers a list of high yield covered calls and monthly dividend stocks. You can easily make 10X your subscription fees and change your life.

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How to Get a 40% Annual Yield for Monthly Income

As income investors, we are constantly seeking investments to secure income for our portfolios. The majority seek dividend through income stocks. At Get Rich Investments, we suggest a healthy dose of stocks that pay monthly dividends. In such a low yield world, these investments offering monthly dividends can prove to diversify your income opportunities. There is also an opportunity to earn a high call yield to produce a significant amount of monthly income.

What is call yield and how does it differ from a dividend yield. In typical income investing, an investor may purchase a stock that pays an annual dividend such as a 3-5% yield. In comparison, the income investor may enter a trade using a covered call strategy. This trade is based on the investor owning 100 shares of stock for each call option sold. The investor receives a premium (income) for each option sold against their stock. The premium income forms the call yield based on the premium divided by the cost of stock.

Let’s look at an example subscribers to our Monthly Income Newsletter invested in during 2019. The stock was Starbucks Coffee (SBUX) that was purchased in January 2019 at $61.30 per share. The total investment for 100 shares would have cost the investor $6,130; and is the denominator of the call yield. Then, each month January through November expiration a front month call option was sold for income. The total amount of call premium income during this period is $2,350 or $214 per month. To calculate the call yield, you divided the $2,350 in call premium by the total cost ($6,130) for 38.3%!

Now hold the farm, this strategy created a 38% call yield! Where can you achieve this amount of dividend yield in such a low yield market without something like a startup-type risk?

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In comparison, if you were just a stockholder you would have received $144 in dividends for a 2.3% dividend yield. By using the covered call strategy, you achieved a 40.6% yield combining the call yield (38.3%) and the dividend yield (2.3%). You should keep in mind this is over 11 months of a covered call strategy.

As a covered call investor, you can place this type of trade on most stocks in the market. I suggest focusing on blue chip type of stocks. Subscribers are engaged with around 10 of these trades and also trade other covered calls on a monthly basis.

There are additional benefits to using this strategy beyond the high call yield. Recently, SBUX was trading at $86.00 per share that created a capital appreciation of a little over $2,400 for this investment.

The covered call strategy creates some downside protection if the stock price has a temporary pull back based on market trading.

In conclusion, income investors should add the covered call strategy to their portfolio to supplement other income investments. It is prudent to not only create multiple streams of income but also diversify your investing strategies across your total portfolio. If low yield have you down, look to a consistent covered call strategy to create a high call yield. Here’s to the next 40% or better income yield.

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