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How to Make $2000 Monthly Income in Bitcoin

I personally believe digital assets are here to stay and have utility valuable to society. I do own several coins including Bitcoin and many alt-coins in my account. I am intrigued by the possibility of using digital assets to streamline moving assets around the world. You should try to withdraw a larger amount of money from your bank to see how long it takes compared to sending a coin to anyone in the world in a few minutes. However, being an income investor, I have found a better way to make $2,000 or more income by investing in bitcoin.

We all are aware of the volatility of cryptocurrencies along with the fate of many platforms offering weekly income. You don’t need to look any farther than Celsius to see the carnage to investors. Many chase income by participating in “yield farming” using their cryptocurrency. Yield farming involves lending or staking cryptocurrency in exchange for interest and other rewards. Yield farmers measure their returns in terms of annual percentage yields (APY). While potentially profitable, yield farming is also incredibly risky.

My strategy is to sell calls against MicroStrategy (MSTR) to generate monthly income similar to all other stocks I trade for the same purpose.

MicroStrategy is an enterprise software company, but I dare say no one cares that it has a software business any longer. About two years ago, the company began buying Bitcoin (BTC-USD) to add to its balance sheet, and it has become one of the largest Bitcoin holders in the world. That has made MicroStrategy simply a leveraged play on the price of Bitcoin, because the software business is far too small to matter in the context of the company’s Bitcoin holdings.

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There are a number of reasons to like MicroStrategy as a long-term stock holding. As background, MicroStrategy is (1) trading at a discount to the price of Bitcoin at the time of this writing. This indicates future upside for the stock as it closes this discount. The stock is trading at ¼ of its all-time high when Bitcoin was above $60,000. Chairman Michael Saylor is (2) committed to holding the current Bitcoin (~130K) while adding more in the future. And (3), you get the future upside in the price of Bitcoin. Therefore, you get exponential growth by parity with Bitcoin while the company buys more to hold and grow!

 Now to the income strategy. MSTR is a good candidate for the covered call trade. This trade requires the investor to own 100 shares of stock to sell one call option against the shares. The investor receives a premium for each call sold. This is the income portion of the trade.

At this time, an investor can sell a call with 25 days to expiration for $2,000. This call is 13% above the current trading price for MSTR. Here are the numbers as of this time: stock at $335 with the 380 strike call option selling at $20. This is an assigned return of 20% in 25 days. And, you get $2000 in One Month!

This also plays into the “wheel strategy” for income. After executing the covered call, your shares may get call away at expiration. Then, you sell a cash-secured Put at around the 380 strike price for $2000 to cover the next month income.

You can rinse and repeat each month to generate your $2000 monthly income!

Adding a Put to a Covered Call

When you buy a put for a covered call trade, you then have both a sold call and bought put on the stock you own.  This is called a “collar” as you have a  protective put on a covered call.  The classic collar has an at-the-money (ATM) call and put at the same strike price.  In the case of the covered call trader, the  bought put serves as additional downsize protection against a stock price decline.

When you add a put to a covered call trade, you are adding additional cost to the trade.  This will increase your cost basis for the trade. However, you can create a totally riskless covered call trade.  Let’s look at an example using XYZ.

XYZ is trading at $74.77 in the market.  You can sell the 75 Call for $4.20 and buy the 75 Put for $4.00.  If the stock is above 75 at closing, if will be called away and you gain $0.43 in profits (75-74.77+.20).  Additionally, we could sell the put if there is any value left before expiration.  In this scenario, you make money from the covered call side.

If XYZ is trading below 75 at expiration, the call will expire worthless but the put will have value.  You would exercise the 75 put which will give you $75.00 for the stock shares trading below the 75 strike price.  You would then make a profit of $0.43 on the protective put side of the trade.

XYZ
Stock Price         74.77
Sell 75 Call           4.20
Buy 75 Put           4.00
Net Premium           0.20
Net Cost         74.57
Downside Risk                –
Max Profit           0.43

 

This trade is a risk-free trade because the total cost basis ($74.57) is below both strike prices of 75.  Regardless of what happens to the stock price, you will receive $75.00 for your stock. You can say that this collar trade is an arbitrage trade because there was a positive difference between the call and put prices at the 75 strike price.  The return of $0.43 is only a 0.58% return.  When you add trading commissions to the cost basis, this can’t be arbitraged by a retail investor.  For more active traders, you can vary your timing of closing the call and put sides to increase your profit.  For example, when the sold call loses the majority of value, you can close this side by buying to close the call.  Then, you will own the stock with the put guarentee at the strike price.  There are numerous possibilities when you actively managed the collar trade if you make adjustments before expiration.

You can construct a similar trade with different strike prices for the call and put.  When you vary the strike prices this, you are changing the cost basis and risk exposure.  For example with the 75 covered call on XYZ, we might buy the 72.5 put for $3.15 (see table below).  This will give us a max profit of $1.05 and downsize risk of $1.22.

XYZ Stock
Stock Price         74.77
Sell 75 Call           4.20
Buy 72.5 Put           3.15
Net Premium           1.05
Net Cost         73.72
Downside Risk           1.22
Max Profit           1.05

 

The great part about this type of trade is that you are limiting the amount of downsize by using the blanket put.  If the stock market bottom falls out with a 10% correction, you will only lose $1.22 per covered call or 1.65%.

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The Best Method for Call Writing

Most experts in the stock market will generally say, “the writer of an options is foregoing any increase in stock price that exceed the strike price for the premium received when selling calls.  The option writer continues to bear the risk of a sharp decline in the price of the stock. The cash premium will only offset this loss.”  Do you buy into this way of thinking?  This is not correct based on how I trade covered calls.

With my method, you no longer care about the price of the stock that you purchased.  When the stock does go down, we would buy back the option at an inexpensive cost and immediately write a new option.  For example, we received a premium of $3.00 and close it at $0.25 when the stock price drops.  If the stock price went down $5.00, we would write a new call at at a $5 lower strike price.  This may net an addition premium of $3.00 so when you add the premiums minus the buy back of the first option we have $5.75 while the stock only dropped $5.00.  The second premium helped to offset the loss from the strike price.

When the stock does not reach the strike price, let the option expire, keep the premium, and write a new cal at the same strike price.  When the stock price goes above the call strike price, buy back the call option and write a new option at a higher strike price to reflect the gain in the stock. the second premium will help defray the cost of the buyback while you have a gain in the stock price.

For the buyer, options are a wasting asset as time decay erodes value.  The time value portion of a option is always zero at expiration.  Selling the time value repeatedly on the same stock makes option income work for you.

With my trading method, you will not be waiting on the stock price to go up to make money.  You will make money on the wasting time value of options you have sold.  this will change your investing philosophy about the stock market.

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Want To Create A Second Income?

Get Rich Investments, an online leader in helping individuals to create income producing investments, has a newsletter to guide investors seeking a second income.  This is one of the most valuable tools for investors to learn how to create monthly income from stocks and option strategies.

Does the idea of using an income investing strategy to create a second income every month on your funds appeal to you?  Get Rich Investments has created the Get Rich Monthly Income Plan to teach individuals how to create multiple streams of investing income.  This is a low-cost newsletter providing the following services:

    1. A list of “monthly dividend stocks” that pay dividends month after month. These investments can pay more than 10% annually (focus on several 15% yields) and can sometimes be purchased at a discount to net asset value.
    2. A list of covered call trades consisting of high quality stocks such as the S&P 5-star research rating of the best stocks that are recommended as strong buys. These lists are updated each week with select trades added daily.
    3. Low risk investments to minimize market risk and to prevent your portfolio from taking a big lost in such uncertain market environments like we are experiencing today.
    4. We have created a strategy called the Blanket Put that will protect your investment from market downturns. The Blanket Put is your safety blanket to protect your portfolio from market downturns. This is worth the membership fee by itself.
    5. Access to multiple education resources to better learn how to be a more successful investor. Trades don’t end when you make a stock buy, sell a call, or complete the trade. Here we want members to be educated about how to manage a trade and when to take action.

The Get Rich Monthly Income Plan diversifies risk by seeking multiple streams of income. You can create monthly income by: covered call trades, monthly dividend stocks and dividends from owning high quality, conservative stocks. That is multiple streams of income from this simple list as we focus on “cash flow” to the investor to improve your quality of life. This is a true passive side hustle for income.

We have more than 20 years experience in the markets including trading covered calls and monthly income investments.  In addition, we have Masters in Business Administration (MBA) from a top business school and other experience in corporate finance and strategy.  We have authored several books including the original Get Rich – Stay Rich: Investing for Monthly Income that is currently on sale at Amazon and other bookstores around the world. It is important to you that your monthly income is in qualified, experienced investor hands who can be trusted to deliver the best trades.

Learn more about investing for income.

How To Use Moving Averages in Covered Call Selection

The use of moving averages are important to assessing the price trend of a stock.  Even better is using multiple moving averages to increase your accuracy of identifying the stock trend.  The definition of a moving average is the average of the stocks closing price over a period of time. As a new closing price is made, it is added to the calculation and the oldest closing price is removed from the calculation. This creates a new data point on the moving average as this process continues into the future.

The simple moving average (SMA) is the total of all closing prices for the time period divided by the number of points in the period. The exponential moving average (EMA) weighs more recent closing prices higher than older data prices as the newest data point is more relevant than older price points.  the EMA is more sensitive than the SMA but it has more frequent false signals.

I prefer to use the 20-day SMA and the 50-day SMA in my price charting.  There is nothing magical about these SMAs as other investors may use a 14-day and 40-day SMA.  I like the 20 and 50 day SMAs as a 20-day is 4 weeks or one month based on closing prices and the 50 day is 10 weeks. I usually sell the current month so the 20-day is more suitable to a one month call option while the 50-day serves as my longer term marker.

What should you look for in moving averages?  First, any time one SMA crosses the other the trend has changed (see chart below).  When the 20-day crosses ABOVE the 50-day, then the stock is starting an uptrend.  Conversely, if the 20-day crosses BELOW the 50-day the trend is moving down. The predictive factor happens when the stock price gaps way above the 20-day SMA as this signals a pullback for the stock.

The best covered call candidate will have the 20-day SMA above the 50-day with a flat or uptrending price line.  If the 20-day is below the 50-day, I usually pass on the stock as there are so many other stocks better suited to a profitable covered call trade.

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Click to enlarge

Support and Resistance levels for the Covered Call Writer

One of the keys to covered call writing success is knowing how to determine support and resistance levels.  A support level is a stock price low that the price has hit and recovered from to advance back up due to more buying than selling of shares.  This is referred to as the trading floor until a stock price breaks below it.  The resistance level is a higher level that the stock price has hit and pulled back due to more selling than buying of shares.  This ceiling acts as resistance that the stock price must break through to advance higher.

The more times the price has hit a support or resistance level, the stronger it is and more difficult to move through it.  The longer it takes for the stock to test
these levels, the stronger they are to break through.  For example, an intraday test is not as strong as a one week test of these levels.  The higher the stock volume at the level, the stronger the level is holding.  For example, if volume is above average and the stock price doesn’t break out then the level will hold and be more difficult to go through.

Most technicians draw the support and resistance levels at the lowest and highest price points on a stock chart.  If stock price reached a certain support or
resistance level multiple times, you can safely disregard a single price spike above or below these levels.

How can the covered call writer use these support and resistance levels.  If a quality stock has successfully tested the support levels, then you know where the price bottom is for that stock.  You can also use the support level to tell you when to react as a break below support requires a new decision on what to do with your covered call – close it, roll out, etc.  The other use of support and resistance for the call writer is to delay entering a new trade when a support or resistance level is being tested.  These price points should be watched closely to see if they hold.  If they do not hold, then be prepared to make
a decision on managing the covered call trade.

As income investors, we seek to create consistent monthly income by selling options to collect monthly premiums. We focus on the Monthly Income Report which is published the weekend following option expiration each month. To supplement members, we will publish additional trades and income opportunities

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Option Selection for Covered Call Writing

Throughout the day, a person makes hundreds of decisions.  Paper or plastic? Double cheeseburger or salad?  Home brewed coffee or Starbucks Brew to Order?  And for option traders, which option to select from a large list of strike prices and expiration dates.

Option selection can be difficult especially for the new option investor.  Do you play a short-term or long-term option?  Do you take risk with OTM options or play it safe with DITM options?  Don’t let the selection process get too complicated for you.  Follow these three questions when making an option selection:

  1. What direction will the underlying stock go in the future?
  2. What are your expectations for the stock?
  3. What is your risk tolerance?

For the first question, don’t just guess where you think the stock will go in the next few months.  Look at the put/call ratio on the open interest tables.  Are there more calls than puts?  This indicates that investors feel the stock will rise.  If there are more puts than calls, then investors feel that the stock is going to decline.  You can use the put/call ratio to help determine the future direction of the stock.

The risk is in selecting the strike price of the option.  You have three choices: ITM, ATM and OTM.  Which one works for your stock?  An ITM has the highest price as it has intrinsic value because the stock price is higher than the option strike price.  This intrinsic value provides a spread for the option, making it less risky.   An ATM is when the stock price and option strike price are very close.  Generally, the price of the option is all time value and it has more premium than an OTM option.  This is the middle ground on the option risk scale.  The OTM option is the riskiest option play.  The option writer gets less premium income and takes on the risk that the stock will move higher to get a better return.  However, when the stock price does rise, OTM options have the greatest return.  You probably have heard about the more risk, higher return trade.

Now, you need to select what time to sell?  The more time the more premium income.  Selecting the right time to sell is up to the option trader.  Regular options are up to nine months and LEAPS are for up to 2 years.  You must decide how much premium you want to receive based on how long you want the trade to be.  For covered calls, most writers select the monthly option and repeat until called away.  However, this should be based on the objective of the covered call writer.

As income investors, we seek to create consistent monthly income by selling options to collect monthly premiums. We focus on the Monthly Income Report which is published the weekend following option expiration each month. To supplement members, we will publish additional trades and income opportunities.

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Three Steps to Early Retirement as a Millionaire

Notwithstanding a strong U.S. economy, only 25% of Americans say they feel financially prepared for retirement, according to a report just issued by the Certified Financial Planner Board of Standards. : Close to 80% of participants surveyed say they are not reassured that they have the best retirement savings strategies available to them. The good news is, three simple steps can help people build wealth and retire early.

While anyone can benefit from these action steps, they can be particularly powerful for financial independence and early retirement.

1. Pay yourself first

The single most important decision you’re going to make is to pay yourself first. This means, when you earn a paycheck, the first person who gets paid is you. Most people don’t do this even if they have employer matching funds. They focus on paying bills and other personal expenses without considering saving money.

2. Invest your savings

To be clear, simply saving a lot of money doesn’t make you rich. You have to have this money invested for growth. You cannot put this money in a money market or a CD, where it grows at 1% or 2%. You’ll never build wealth that way. We have created an investing plan to purchase monthly dividend stocks. These investments pay you a dividend check every month. Even better, we focus on yields above 10% to beat the market. How would you like 5, 10 or 30 checks coming to you each month?

3. Compound your wealth

When you receive your monthly income, reinvest a portion into new monthly dividend stocks. This grows your wealth over time, increases your income each month and offsets the impact of inflation. Also, this creates a lasting legacy as you are living from the dividends and not touching your capital.

The earlier you start, the better, thanks to the power of compound interest, which can cause your wealth to snowball over time. Yes, early retirement is possible as your monthly income exceeds your living expenses.

Create your legacy by joining our Monthly Income Plan today.

Financial Independence, Retire Early with Passive Monthly Income

Many people are becoming part of the FIRE movement, which stands for “Financial Independence, Retire Early.” Americans across the country are dreaming of leaving the traditional workplace in their 30s and 40s by investing enough assets in the first decade or two of their careers so they can rely on this nest egg and its investment returns the rest of their lives. Financial independence, to many of these individuals, is the ability to leave a stressful job for a less lucrative one, even if it means making a few sacrifices along the way.

These participants use passive income to help them get to their goal, especially monthly dividend stocks and other income producing investments. They’re typically less risky than investing in individual company stocks but it takes longer to see growth. There is definitely no one solution that you should be in this proportion of stocks and bonds, nor should someone try to time the market. Be comfortable getting there slower through using compounding income.

Taxes are also an important component to planning for FIRE, and individuals looking for financial independence should leverage numerous retirement savings and investment vehicles instead of just one type. Some workers may want to take advantage of the high contribution limits of a 401(k) plan ($19,000 in 2019) as well as a Roth individual retirement account, which is funded with after-tax dollars and then grows and is withdrawn tax-free.

Increasing income in more traditional ways, such as through raises and new job opportunities, may have the greatest effect on how much someone saves for early retirement. They suggest staying competitive in the job market or asking for raises, but not necessarily juggling numerous jobs and burning out.

At Get Rich Investments, we strive to create monthly income from monthly dividend stocks, ETFs, CEFs, covered call trades and other investments. It is best to diversify your holding using multiple approaches.

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The Magic Number to Save for Retirement

Financial advisors always dodge the question of how much to save for retirement. There are research papers that contradict each other. They suggest there is no magic number for all or “it depends” or “it’s complicated.” I don’t buy this malarkey from the industry. Here is what I suggest and how I fund my accounts.

Don’t give up hope. From most research there’s a pretty useful rule of thumb for all people: Count on your fingers and … Save 10% — now.

Between you and your employer, set aside at least 10% of your paycheck. If your employer contributes 3%, then your share is at least 7%. If the company kicks in 5%, then you save at least 5%. If your employer does nothing, set aside at least 10% of each paycheck on your own.

Of course, there will be times when you’re between jobs or you need your money for a pre-retirement-age emergency. In those cases, you can put your money in a Roth individual retirement account (IRA) account. That way, you can take your contributions out without penalty. (There are also Roth 401(k) accounts, though they have more complicated withdrawal rules.) Don’t let the fact that you might need money someday keep you from saving for retirement now.

At Get Rich, we follow a monthly stock dividend plan where we get monthly dividends. We invest in 10 to 30 different stocks, notes and CEFs to diversify our holdings. To prevent yourself from running out of money in the golden years, reinvest 10% of your dividends back into your accounts. Therefore, if you are living on the dividends, you get a pay raise each month! And, your capital can leave a legacy for your family forever. Lastly, it is passive income that can be created regardless of where you live and play.

Subscribe today to start your monthly income plan.

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