Get Rich - Stay Rich - Investing for Monthly Income

Posts Tagged ‘passive income’

How to make $3K in Extra Monthly Income

The year 2016 was another stellar year of total returns and monthly income. Our perpetual covered call strategy was a big winner.  In this strategy, we create a covered call position to sell monthly call options for income and buy a long dated put option to protect our downside risk.  The put cost is spread across several months so the cost is low per month and will only slightly diminish our monthly income.

As we close out 2016 and reset for 2017, we are reviewing the results we obtained from the perpetual covered call strategy during the past year. In terms of total return as tracked in the monthly spreadsheets, the average across all positions was 27.8% during 2016. In the past year ending 12/17, the S&P 500 only returned 12.75% and the DJIA returned 16.8%. Therefore, we more than doubled the S&P and beat the Dow Jones significantly while generated significantly more income. The average monthly income across our open positions was $152 for each position with 100 stock shares! AND this includes the cost of having a long put to protect against downside risk on each position.

The average cost of 100 shares across all positions was $5,278 which generated an average of $152 of income each month. A $50K portfolio will generate an average of $1500 per month while a $100K portfolio creates $3,000 every month! This is proof our income strategy works. We target a 2-3% return per month on average.

We had no losing positions in our perpetual call portfolio in 2016. We had 3 positions with returns greater than 40%and all but one with returns greater than 12.7% of the S&P 500 in 2015.

The table below shows the results for each perpetual covered call position during 2016. This table is the same information as displayed in the monthly tables for each position (based on owning 100 shares of stock and selling one covered call each month). This is for portfolio tracking only as subscribers will own more than 100 shares and sell like size amount of call options for income each month.

2016-covered-call-results

 

 

 

 

 

 

 

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How to be a Multimillionaire

Grace Groner started her career as a secretary at Abbott Laboratories more than 80 years ago. Four years into her job, she purchased three shares of our company stock for just under $200. She held on to those three shares until she died, in 2010.

Those three shares alone made her a multimillionaire. She could thank the company dividend — and the miracle of compounding — for her $7 million fortune.

Grace wasn’t abnormally lucky. Any investor who bought $1,000 worth of high-dividend-paying stock 75 years ago would have about $3 million today.

Are you ready to start your million dollar journey?

You can learn how to compound your money even faster than Grace. To do this, you need consistent returns to increase your dollars being compounded. Secondly, you need monthly income to accelerate the compounding effect. Lastly, you need an investment plan to achieve your goals.

Our monthly income subscribers are well on their way to financial independence. Here is the monthly returns from selling outs:

July:                 3.1%

August:            1.5%

October:          1.6%

November:      2.7%

These returns result in a 4 month return of 9.2% when compounded and near 30% when compounded annually!

Join the Monthly Income Plan today.

Winning in the Year of the Improbable

The word “improbable” is defined as not likely to be true or to happen. Have you noticed how many events have happened in 2016 that were improbable? The Cleveland Cavaliers were trailing 3 – 1 in the NBA Finals but rallied to win the first world championship for the city of Cleveland. Last night, the lovable losers, Chicago Cubs, completed a 3-1 rally to win the World Series. It ended a 108 year drought in Chicago for the Cubs. Now, this is an improbable event. There have been others such as the surprise Brexit vote that tanked markets a few months ago. What’s next? Does Trump win the presidency?

The stock markets have pulled back in the last week due to uncertainty around the election coupled with projected FED interest rate increases. Today, a talking head on CNBC was calling for investors to sell everything as the market is ready to crash! I have seen these types before and they don’t scare me. I plan to stick to doing what my investors do best – sell options for income.

Yes, markets will pullback when they lack clear direction. But I have some downside protection by selling options and continue to reap income along the way. If I just sit in a long stock position, its value will fluctuate with the market. I prefer to create income each month regardless of the market direction. I sell call options on the stock I own for both income and protection. When the market rebounds, I will sell put options for additional income too.

With this strategy, there is no improbable event. You get paid when you sell the options and can continue to compound your income.

You don’t need to worry about the next improbable event – join the Millionaire’s Club today.

How Put Selling Creates Monthly Income

Why would an investor sell put options instead of just buying the stock? You already know my response to this question – to create monthly income. There are several reasons investors should include put writing as a portion of their investment portfolio. Here is my list:

First and foremost is to create income. In this case, we are looking to collect the cash premium from selling the put option and not necessarily purchase the stock. This concepts is very important to better understand. My initial objective is capturing the premium but I realize in some cases the stock will be put to me. This is why I only sell puts on a select list of stocks I am willing to own if put to me. I like to focus on world class stocks that have stable earnings, strong balance sheets, pay growing dividends and trade within a low beta range in the market. This is part of my success using this strategy as I can collect dividends and sell covered calls for more income if the stock is put to me.

Secondly, I can purchase the stock at a lower price or discount to its current market price. The cash premium I collect from selling the put option reduces the capital outlay to enter or purchase the stock. I have experienced periods where I would sell monthly puts on a stock for 6 to 9 months before the stock was put to me. The amount of premiums added together made the entry price of stock significantly below the market price. For example, assume I average premiums of $100 over 6 months of monthly put writing which sums to $600. I have just lowered the purchase price of the stock by $600 – this is buying stocks at a discount.

Lastly, I use put selling to create my favorite income strategy – the Put-Call-Dividend (PCD) Income Strategy. This is simple selling puts each month on a select stock to collect monthly income. If the stock gets put to me, then I sell covered call options for more income while also collecting dividends paid by the stock. I sell call options for premium each month until the stock is called away from me. Then, I will start selling puts against the stock again. This strategy is exactly why I only sell puts on stocks I want to own – world class, strong dividend stocks.

This is the best income strategy I use in today’s market. In the October expiration cycle, our subscribers made 1.6% for the month by selling put options. For the past 3 months, monthly returns range from 1.5% to 3.1%.  How would you like to an extra $500, $1,000, $2,000 or more in income each month? Learn how to create monthly income by joining our investment newsletter.

 

Put Your Money to Work

To start on the road to financial dependence, you must save some money. Most people start with an emergency fund, retirement account such as a 401K and maybe buy some real estate for rental income. Then, smart investors start creating additional streams of income. At Get Rich Investments, we like to buy world-class dividend stocks, CEFs paying money distributions and sell options for premium income. In today’s investing environment, you can no longer keep your money in near zero savings account or certificates of deposits.

“The only reason to save money is to invest it,” writes Grant Cardone, who went from broke and in debt at 21 to self-made millionaire by 30. “Put your saved money into secured, sacred (untouchable) accounts. Never use these accounts for anything, not even an emergency.”

While always subject to a degree of risk, investing is one of the most effective ways to earn more money. As Ramit Sethi writes in his bestseller, “I Will Teach You to Be Rich,” “on average, millionaires invest 20% of their household income each year. Their wealth isn’t measured by the amount they make each year, but by how they’ve saved and invested over time.”

Why would an investor sell put options instead of just buying the stock? You already know my response to this question – to create monthly income. There are several reasons investors should include put writing as a portion of their investment portfolio. Here is my list:

First and foremost is to create income. In this case, we are looking to collect the cash premium from selling the put option and not necessarily purchase the stock. This concepts is very important to better understand. My initial objective is capturing the premium but I realize in some cases the stock will be put to me. This is why I only sell puts on a select list of stocks I am willing to own if put to me. I like to focus on world class stocks that have stable earnings, strong balance sheets, pay growing dividends and trade within a low beta range in the market. This is part of my success using this strategy as I can collect dividends and sell covered calls for more income if the stock is put to me.

This is how I put my money to work. Join me in creating multiple streams of incomes to live the life you desire.

How to Develop Multiple Streams of Income

To achieve financial independence, you must create a level of income to cover the lifestyle you desire. There are many ways to accomplish an income to fund your life experiences. Many work during their life to save money for this purpose. Some are entrepreneurs that start businesses usually with hired managers to carry the workload to create their income. Others invest in passive investments such as rental housing. Here is a look at investing strategies to increase your earnings and create multiple streams of income.

In author Thomas C. Corley’s five-year study of self-made millionaires he found that many of them develop multiple streams of income: 65% had three streams, 45% had four streams, and 29% had five or more streams.

“Three streams of income seems to be the magic number for the self-made millionaires in my Rich Habits study, but the more income streams you can create in life, the more secure will your financial house be,” he writes.

I apply Corley’s thinking to my investment portfolio by identifying several streams of income. One passive income stream is collecting growing dividends from world class stocks. These stocks have a strong financial position, competitive market position, known brand and growing dividend history. I also invest in closed-end funds that pay monthly dividends. This create a diversification opportunity as I can add fixed income, preferred stocks and other types of investments. Lastly and probably more important, I sell options for monthly premium income. This includes selling cash-secured puts and covered calls. I love this strategy and have created a consistent, growing stream of income.

Join me in creating multiple streams of incomes to live the life you desire.

Are You a Penta Millionaire Yet?

In a recent article published in Barron’s, “Penta Millionaires: the New Rising Class” it discusses families with net worth over $5 million as a fast growing class in America. While this is correct about the changing of wealth, it still separates the wealthy from the other classes. While we all strive to attain our definition of success, the media continues to focus on the upper class. Let me share a secret with you, you can still have a productive and fun-loving life without being in the top income bracket. This is why we write a monthly income newsletter – to help those wanting to better their life and create a sustainable monthly income.

Here are some excerpts from the Barron’s article:

It is fair to say that at no time in history have so many Americans become so rich—or amassed their wealth so quickly. When John D. Rockefeller took title as the country’s first billionaire, in 1916, it was as rare an event as sighting a white whale, and seven decades later, the number of billionaires had still only reached 44. Since then, however, the ranks of the megarich have surged ahead with a caffeinated velocity.

At every level of the wealth pyramid, according to Penta’s research partner Boston Consulting Group, the ranks of millionaire and multimillionaire households have expanded. Last year, for example, there were 492 U.S. billionaires, meaning that 100 new billionaires were created in the past five years alone. But the most interesting trend is a little further down the pyramid: The number of households with more than $5 million in investible assets just crossed the one million mark, up 5% from 2014.

Flash forward to recent times. The rank-and-file rich have grown by just 5% a year recently, but this steady if modest climb over seven years has actually delivered better results. We now have a million-strong army of very rich emerging from the ho-hum, low-inflation economic growth that has been coupled with robust capital markets. Many have, in this calm environment, quietly sold off their private business or cashed in their stock-option windfalls.

At Get Rich Investments, we focus on creating stream of income to improve life and become financially independent. Once you learn how to create monthly income, you now control your own destiny. We have several investing strategies focused on low risk trade such as covered calls, selling cash-secured puts, buying monthly dividend CEFs and collecting divide3nds from world-class stocks. This is the way to increase your wealth on a monthly basis.

One strategy is the Put Call Dividend (PCD) Strategy where we sell puts for income to enter a position, then sell covered calls for income while collecting dividends. This creates three income streams from a single investing position. This positions the investor in a low risk position as you can continue to create option income each month by selling puts and calls on the same stock. If the market goes up – you make income. Same for when a stock pulls back – keep selling options for income. It is like collecting rent on a rental property each month – without the hassles of a tenant.

I can’t promise you will be a Penta Millionaire, but you will definitely create more income and move toward becoming financially independent.

Learn more about getting started on your wealth journey today.

The Case for Income Investing

Today’s stagnant economy isn’t what it used to be. Societies, both individuals and governments, are saddled with enormous amounts of debt and yields have disappeared making it impossible to generate income from traditional fixed income investments.

Many top experts, including Jeff Gundlach who is considered the “Bond God,” believe this is the “new normal” and that rates could go even lower still. Which doesn’t offer a lot of hope to retirees who need income now, or future retirees who need to grow their portfolio at a much faster clip if they hope to retire at all.

Investors often overlook the value of selling options for income. This is in part because investors misunderstand the risk of these investments and how to manage this type of investment.  But many individual can benefit from these investments. If the income from selling puts and calls is reinvested every month, the investor can compound savings and buy more investments such as stocks, CEFs, etc.

This can be a growth strategy for investors no longer contributing to their portfolios or retirement accounts.  This type of portfolio of investments is likely to produce a higher yield than a growth stock portfolio. And, investors will benefit from the income even if the portfolio doesn’t have any capital appreciation or the market moves sideways. 

Investors can create a diversified portfolio for option selling by writing cash-secured puts, selling covered calls and owning dividend paying stocks and CEFs with monthly distributions.  If income is a goal, these option selling strategies and income investments could be worth a closer look.

I combine the strategies for market diversification of income opportunities.  Also, I combine then to create new investment vehicles.  The one strategy I prefer has 3 income opportunities: (1) selling put options to enter a stock, (2) collect dividends if put to me, and (3) sell covered calls until the stock is called away.

Where else, on even a modest portfolio, can you generate an extra $1,000 to $5,000 per month or more? Owning a basket of strong dividend paying blue chip stocks might earn you 3% to 5% per year. But to generate $5,000 per month in income you’d need a nest egg of $1.2 to $2 million dollars.

Get started collecting multiple streams of income today.

 

How to Sell Put Options for Income

Let’s walk through an example of how to sell a put. After careful selection of the right stock, you decide you would like to create a monthly income stream by selling puts each month on this stock. Let’s say the stock is currently trading at $70 in the market. After reviewing the option chain, you decide to sell the 67.5 put option on this stock that expires in one month. The 67.5 strike price is out of the money and will obligate you to buy the stock at $67.50 only if the put buyer decides to exercise the option on or before the expiration date. The put buyer will only exercise the option if they make money or if the stock price is below $67.50.

As the put seller (writer), you get to collect the cash premium for the option. In this case, let’s assume it is $200 per option contract or 100 shares of stock. The investor now has a risk of $67.50 – $200 = $65.50 per option contract sold. If this amount of $6550 per contract is in the investors brokerage account, this is a cash-secured put. The potential return is $200 which the put seller will keep regardless of the trade outcome.

The investors return is calculated as $200/$6550 or 3.05%. This is a nice return on a one month put option. On an annual basis, this is a return of 36.6%! This is why I sell put options for monthly income.

Here are the details of the trade:

1 Option = 100 Shares of Stock: In this example, we sold 1 put option. In other words, we sold someone the right, but not the obligation, to sell 100 shares of stock to us for $67.50 on or before the option’s one-month expiration date (usually the 3rd Friday of the month).

$ 2 = Our Options Premium: In exchange for giving someone (the put buyer) the right to sell us 100 shares of stock at $67.50, we get paid in cold-hard cash! In options lingo, we get paid in the form of a premium. In this example, our premium is $ 2 per share. Because each options contract equals 100 shares of stock, here our premium is $ 200. This $ 200 is deposited in our account at the time of the transactions. It is ours to keep no matter what transpires before expiration (the end of the contract).

There are 2 potential trade outcomes:

  1. The stock prices stays above the 67.5 option strike price so the put option expires worthless. Put yourself in the position of the options holder (the person that buys the put option from us). The put holder purchased the right, but not the obligation, to sell 100 shares of stock at $67.50 per share. Assume this put option expires in one month. If, at the end of that one-month expiration time period, the stock is trading at a price above $67.50, why would the put holder exercise his right to sell the stock at $67.50 when he can sell at a price above $67.50? They would not exercise the put option! The investor keeps the $200 premium and has a 3.05% return in one month.
  2. The stock declines in price and is below the 67.5 option strike price. The option will be exercised and the shares of stock will be sold to us at the strike price ($ 72.50 per share). Again, put yourself in the position of the put holder for a moment. If, at the time the put option is set to expire, the stock is trading at $65, and the put holder has the right to sell shares of stock at $67.50, why wouldn’t the put holder exercise his right to sell the stock at $67.50 per share? They would. So in this scenario, the cash we previously deposited into our brokerage account ($6750) is used to purchase the underlying shares that were “put” or sold to us. Our break-even point, also referred to as our “cost basis,” is now $65.50 ($67.50 per share we paid for the stock less the $ 2 per share put premium we received from the original sale of the put option). At this point, we own 100 shares of stock and can sell them or write a covered call trade.

This is a simple example of how to sell (write) a put option for monthly income. Once we do this each month we create a stream of cash flow to help us achieve financial independence.

Last month, we were successful on all put trades and averaged 3.5% return for the month.  Imagine making $3000 or more in income each month!   Start making more income each month by subscribing to the Monthly Income Plan.

How to Create a Better Lifestyle

Warren Buffet has always discussed the concept of Mr. Market. This is an idea around each trading day Mr. Market offers you the price to purchase a stock in the stock market. As an investor, you must decide if you want to but the stock at this market price. Is the stock overpriced, undervalued or will the market crash in the coming days? As investors, we can’t predict the future direction of stock markets. And if anyone tells you they can, then run away from them. To get around predicting the stock market, I sell puts on stocks to generate monthly income and I usually win regardless of what the market does in the coming weeks.

When we sell a put option, we are selling someone the right, but not the obligation, to sell shares of the underlying stock to us at a price that we select called the strike price on or before a date that we select called the expiration date. In return for undertaking this obligation, we are paid a certain amount of cash called the premium that the market determines.

Should the put buyer decide to exercise that option by selling his shares to us on or before its expiration date, we are obligated to buy those shares at the strike price. To cash-secure this transaction potential, we deposited the appropriate amount of cash into our brokerage accounts to purchase those shares at the strike price minus the cash premium received.

How often does a put get exercised? This is variable but most research indicates about 80% of options expire worthless or do not get exercised. When a put option expires worthless, the investor keeps the cash premium as their return. Put writers or sellers continue to sell put each month to create and capture the cash premiums. This is the monthly income to supplement your lifestyle.

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