Get Rich - Stay Rich - Investing for Monthly Income

Posts Tagged ‘consistent monthly income’

How To Create Your Own High Yield Cash Machine

Many investors look to their portfolios for income.  To get current income, these investors should look for high yield investments.  High-yielding investments can be a little confusing if you just search for the biggest yields.  This article will share some guidelines to creating a cash machine for high income.

A “Real” High Yield Investment:

  • Pays dividends yields of 5% to 20% annual
  • Highly liquid vehicles that can be bought or sold through discount or online brokers
  • Less volatility than the average large cap stock portfolio
  • Drives dividends from cash-flow, not debt payments
  • Pays dividends monthly and/or quarterly

There are so many investment categories that offer high yield securities.  Here is a list of high yield investments:

  • Business Development Companies (BDCs)
  • Canadian Royalty Trusts
  • Closed End Funds
  • Convertible Securities
  • Corporate Bonds
  • Emerging Market Debt
  • Exchange Traded Funds (ETFs)
  • Exchange Traded Notes (ETNs)
  • Grantor Trusts
  • Master Limited Partnerships (MLPs)
  • Oil/Shipping Tanker Stocks
  • Option Income Funds
  • Preferred Stocks
  • Real Estate Investment Trusts (REITs)
  • Structured Products (i.e. STRIDES)

 While do you want to buy high yielding investments?  The five keys to the cash machine high income investment strategy are as follows:

  1. It pays a double-digit yield
  2. It’s highly diversified
  3. It’s highly liquid
  4. It’s flexible
  5. It offers upside appreciation with less volatility than common stocks

 To build your own cash machine portfolio you must do the following:  

  • Desire to build income portfolio
  • Look for securities paying yields of 5% to 20%
  • Invest in asset classes with strong fundamentals in pockets of economic strength
  • Rotate in and out of sectors of strength
  • Target capital appreciation of 10% to 15% per year

The bottom line is that all income investors should have at least a portion of their income in a cash machine with high yield investments.

Join the Monthly Income Newsletter voted the best value for option income trading

Follow us on Twitter – @GetRichStayRich

You Can Help End Poverty

Learn To Make Monthly Income Trading Stocks And Options.

Strategies for Selling Options

It is widely known in the stock market to buy low and sell high.  Options are really no different than stocks as you should buy cheap options and sell expensive options.  The entire strategy of selling covered calls is selling overpriced options to generate more income.  
 
Call values move in the same direction as the stock price while puts move inversely to the stock price.  The amount of change in the option will be determined by the option’s delta.  If you think a stock price will rise then you would buy a call and if you think the stock price will decline you would buy a put.  
Traders sell options primarily to generate income.  The strategy used will be determined by what you decide the stock price will do in the future:
  1. Bullish/neutral – sell covered calls to create income
  2. Bearish – sell naked puts to generate income as the stock declines
  3. Bullish/neutral – sell OTM puts to create premium income while reducing assignment risk
  4. Bullish – sell ATM puts to acquire the stock at a discount price while keeping the premium income
It is important for the call writer to understand time value.  For the option writer, time value is the major source of income but the option holder sees time value as a negative because option value decreases as time decays.  In general, time is the option writers friend and the option buyers enemy.
In covered call trades, returns are generated by the time value of the option premium.  Assume that we bought the stock for $55 and we sell the $50 call for $7.00.  This is a nice premium but you are obligated to sell the stock at $50.  The time value of this option is $2.00 ($7.00 – $5.00).  If the stock is assigned at $50, then your total profit will be $2.00 or the time value of the option.
As income investors, we seek to create consistent monthly income by selling options to collect monthly premiums. This has been successful for our investors for years. Option selling offers another method to diversify investing strategies beyond traditional dividend investing. We have combined technical stock events with our strategy to identify high returns option selling opportunities.
Join the Monthly Income Newsletter voted the best value for option income trading
Follow us on Twitter – @GetRichStayRich
You Can Help End Poverty


Income Option Trade for a 12% Return

In our Monthly Income Report, we look for opportunities to utilize option selling to generate consistent income. While we focus on selling cash-secured puts and covered calls on high quality stocks, we sometimes identify high return trades for increased income. These are stocks with positive confirmation and continuing chart trend based on technical analysis. This month we have identified a stock with a bullish technical indicator that has potential to generate a 12% return in only 40 days.

The option trade for monthly income:

Stock: CF Industries Holdings, Inc. (CF) manufactures and distributes nitrogen fertilizer, and other nitrogen products. The Company’s nitrogen fertilizer products are ammonia, granular urea, urea ammonium nitrate solution (UAN) and ammonium nitrate (AN). Its other nitrogen products include diesel exhaust fluid (DEF), urea liquor, nitric acid and aqua ammonia, which are sold primarily to the Company’s industrial customers, and compound fertilizer products (nitrogen, phosphorus and potassium or NPKs). The Company’s segments include ammonia, granular urea, UAN, AN and other.

The stock has pulled back from its February levels due to industry pricing pressures. Revenues are likely to rise 13% in 2017 and 6.9% in 2018, after falling 15% in 2016. We see steady North American fertilizer demand growth in 2017, but some pressure on prices. However, new production is likely to lead to increased volumes for CF in 2017. We think market conditions will start to improve with this earnings release as capacity additions slow and Chinese capacity reductions continue.

This stock has formed a diamond bottom pattern (Bullish), providing a target stock price for the short-term above $30 per share. We think the stock can hit the target price within 6 weeks or less. The price recently displayed stronger RSI and positive PMO movements signaling a new uptrend has been established. The Short-Term KST indicator has triggered a bullish signal by rising above its moving average.

Recent bullish option flow has been detected in CF Industries with 5,006 calls trading, 3x expected, and implied volatility increasing almost 4 points to 41.09%. Aug-17 32.5 calls and Aug-17 30 calls are the most active options, with total volume in those strikes near 2,500 contracts. The Put/Call Ratio is 0.22. Earnings are expected on August 2nd.

Sell PUT Option for Monthly Income

 

 

 

 

 

 

 

Strategy: CF is currently trading at $27.89 per share. We want to sell a cash-secured put option on CF using the August 2017 30 Call. For each 100 shares of CF you want to control, sell one August 30 PUT option for a $3.00 credit or better. That’s potentially a 12.0% assigned return in 40 days.

Exit Trade: Be prepared to exit the PUT (buy to close) when the stock price moves above $30 to lock in profits. If not, there is a chance the stock may be put to investors. If this happens, then investors can sell covered calls for monthly income until the stock is called away.

This is a higher risk trade than we normally place in the Monthly Income Report. However, this is a nice setup with a high volatility play, positive chart technical confirmation and increased premium from selling options for monthly income.

Follow us on Twitter – @GetRichStayRich

Join the Monthly Income Newsletter voted the best value for option income trading.

Shop at Chanceslilyshop.com

Shop at Chanceslilyshop.com

Subscribe for FREE Trades

Subscribe for FREE Trades

* indicates required
/ ( mm / dd )
Archives