Get Rich - Stay Rich - Investing for Monthly Income

Posts Tagged ‘income investing’

Why Don’t More People Write Covered Calls

It is hard to understand why more income investors don’t use the covered call strategy more often.  Once you sell the call you have an automatic income amount set for you.  Perhaps the biggest reason more people don’t write calls is they are not aware of the strategy.  Unless you stagger upon the strategy or research it online, it is difficult to understand.

Most financial institutions do not mention covered calls as a strategy to their clients as they may risk losing business if clients pursue this strategy on their own.  These advisers are being paid commission on the amount of funds they manage so they have a conflict of interest with their clients.  Simply, they make money on the products you buy from them.

There is a certain amount of fear involving the trading of options.  Some resources lump together all option strategies as being too risky for an individual investor to use in their own portfolios.  Yet, these same “experts” will suggest you buy a small cap growth stock trading at a 100 price to earning ratio.

By producing cash flow from an asset DOES NOT increase the risk of owning the asset.  think about this: all investors should seek a return on their money which is cash flow.  Of course, if you are in the nail business you always recommend hammers!  You must realize that your interests are different from the financial institutions.  And you are the only one to focus 100 percent on your needs.  However, financial advisers make money when you do and when you don’t!  Your biggest decision is to rely on their advice or handle your own investing.

This blog believes in the individual investor and his ability to generate monthly income from writing covered calls, selling puts for premium and owning monthly dividend paying stocks.

Join your journey to independence today.

Covered Calls for Life

There are many different styles of covered call writing.  Some people never do more than write calls on stocks in their portfolio to generate additional income.  Other people buy stocks only for the purpose to write calls then sell them. Covered call strategies include active trading for directional moves, for traders with long-term time horizon and those seeking low-risk or limited risk trades.

For the conservative investor, you can write calls that are deep-in-the-money which limits the amount of risk in the trade.  This is a good strategy for those who are fearful of losing money.  For the lazy investor, they should look to a longer call time horizon that is many months out or even sell a leap call.  For the monthly income investor, they should sell calls at-the-money which expire during the next month.  This serves the purpose of creating a monthly income that is updated at the monthly expiration date.

The conclusion is that you can utilize the covered write strategy that best suites your income needs and personal investing style.  Or you can use more than one strategy to mitigate your risk level in income investing.  I sell calls when the market is reaching over priced levels for downside protection.

Join our community to generate monthly income using options strategies like covered calls.  We now have new spots open for new members.

Passive Income Investing

Passive income is defined as “income generated with minimal work through your investments such as interest, dividends, or option premiums but also includes any income system that generates income for you!”
In order to increase your quality of life, the only realistic strategy is to increase your income, and reduce the amount of hours you work to earn income.  How do you do this you might ask? By using time tested wealth creation strategies and investment techniques to create, increase and maintain your passive income.

Passive Income Investing

The easiest way to make passive income is to earn interest or dividends on bank accounts, stocks and electronic-traded funds (ETFs).  This is one of the safest strategies when you own the right securities.  Many ETFs pay monthly dividends that can be combined to create a significant number of passive income sources or checks each month.  More on this later.

One of the best ways to leverage your investment capital is to use stock options. There are literally thousands of ways to use options, both as a trading tool and as a way to protect or hedge your investments.  But options can also be used to create passive income through becoming an option ‘writer’ instead of a ‘taker’.  Here, you get paid a premium when you sell the rights to an option.  This premium is your passive income source.

The optimal strategy is to combine investments that make you rich with investments that keep you rich.  I refer to the former as your “get rich” account and the later as your “stay rich” account.  Basically, you make passive income from your get rich investing and store it in your stay rich investments.  It really is that simple.
Get Rich Passive Incomes
The following is a list of passive income generators you will receive in each Passive Income Investment Report.  These investments are what you will use to get rich by investing in these instruments each month.  You will receive a number of trades for each category but you decide which types of passive incomes you are comfortable investing in your account.
  1. Covered calls on stocks you purchase.  We have a proven system of identifying conservative covered call investments that can generate 3-5% return each month.  You can select from our list or invest in all recommendations.  Our system focuses on selecting stocks with the right volitility so you don’t get burned by high-risk investments.
  2. Cash-secured PUT trades to enter a position.  When you find a stock you want to purchase, then sell put options on the stock to lower the purchase price and to collect option premium for cash.  Do this monthly for income until the stock is put to you,  Then, sell covered call options on the stock.
  3. Dividend investing for cash.  This is a simple investment in world-class dividend stocks and CEFs that pay monthly distribution.  This also provides a way to diversify your types of income by using various CEFs investments such as alternatives such as REITs, bonds and many other funds.

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 with More Income

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.

Live the Life you Want – Get Started Here

How to Create 60 Paycheck Every Month

To achieve financial independence, you must create multiple income streams to replace earned income. Warren Buffett states “You will work the rest of your life if you don’t make money while you sleep.” There is a simple method to position yourself for unlimited passive income. Now, the recently released book , “Passive Income Monthly Plan: Create 60 Paychecks in 90 Days” lays out a plan anyone can achieve regardless of where you may be at the starting line.

Obtaining Extra Income is Absolutely Critical in Modern Day America

If you’re looking to get extra income… there is simply no need to get a part-time job. It’s much easier than that. The KEY to making money is tapping into multiple sources of income.

Once the extra money starts flowing… you can afford to live the way you want.

… you can take that dream vacation, buy that new house… or finally afford to start a family.

In other words, you won’t ever have to worry about the financial security of you or your family again.

The real trick is to make your money work for you!

The Book will show you how to:

  • Literally setup 60 monthly dividend stocks that will pay you each month – 720 checks per year! You can grow these dividends over time – Unlimited Income – to achieve early retirement on your terms;
  • Show you how to get stated with as little as $5 in new stock accounts that charge no commissions with no account limits;
  • Diversify your portfolio to be safe when the market goes into a downturn such as a recession or other market crisis – you continue to make monthly income regardless of market volatility;
  • Create a 15% saving account as no recommended monthly dividend stock has an annual yield below 10% – with the average across all investments at 15% – where else can you make this much income?
  • How to eliminate longevity risk – never outlive your money – your money will continue to increase your income to not only surpass inflation but grow in perpetuity;
  • Leave a life legacy to be passed on to your loved ones like the Rockefellers and other wealthy families have done throughout history.

The Passive Income Monthly Plan is a landmark publication that will change many lives. There is endless discussion and schemes online to suggest you can take over the world by writing articles, making Youtube videos and such. This book gets straight to the point with concise “how to” directions in a single sitting.

Get started today as the book is at a special price on Amazon Kindle. Click here to visit the listing: “Passive Income Monthly Plan: Create 60 Paychecks in 90 Days

To learn more about creating multiple streams of passive incomes, visit the website: passiveincomemonthlyplan.com for a free subscription.

Back to Warren Buffett – make money while you sleep – with this plan.

Covered Calls for Life

How do you measure the financial health of a business or public company? They are measured by the amount of cash flow they produce. All investors understand this concept as this leads to the earnings reported and financial strength of the company. Covered call investing provides a large amount of cash flow.

There are several styles of covered call writing. Some investors never do more than write calls on their portfolio stocks that can be an art within itself. Many investors buy stocks for the express purpose of writing covered calls on them and then sell the stocks or let them be called away at expiration. There are covered call strategies for the active trader who seeks action, for the shoot for the moon directional trader, for the lazy writer and for those with a long-tern horizon. Then the conservative crowd are fearful of risk and seeking low-risk or limited-risk trades.

As an investor, you can have covered call your way. No matter your lifestyle, if you have a computer or smart phone, there is a covered call strategy that will work for you. Is it riskless? No – but there are ways to lower your risk in the trade like insuring the trade.

If you are an investor interested in creating income streams. Then, covered call writing should be part of your portfolio.  You can write calls against your dividend stocks to enhance your income. I like to think about covered call writing as a monthly income stream.

I can sell a call option each month on a stock I own. This premium income is automatically deposited into my account at the transaction completion. Now, do this every month for a year. Then, add up the amount of the premium income for the 12 months and divide it by the purchase price of the stock. Compare this calculated covered call yield to the stock dividend yield. Which is higher? Typically, the stock dividend yield may be 3-5% but the covered call yield will be 15-20% yield.

For an income investor, a call yield this high is a great stream of income and it provides some downside price protection. Using the “rule of 72” will result in doubling your investment in 3.5 years. Even better, you can add $1,000s of income each month to a medium size portfolio.

The theory of covered call writing explained here should catch the eye of the income investor. This clearly shows why covered call should be a lifestyle-making portion of your investments. We like to say Covered Calls for Life is where it is at for multiple streams of income.

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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? Get Rich using our income methods.

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.

The Biggest Mistake New Call Writers Make

Covered call trading is not like directional trading which has an objective to time the movement of a stock in the direction it is moving.  Covered writing is a game of regular, incremental returns.  The covered call writer’s objective is to collect the option premium for income without taking any damage to the downside of owning the stock.  The secret to success for the call writer is to make smaller, more consistent returns compared to a advanced option trader who makes many bets waiting for a 50% – 100% winner.  The biggest mistake by new call writers is writing a stock solely to capture the fattest time value premiums.

To improve the chances of being successful, the call writer should focus on stock selection.  The covered call trader should focus on 3% monthly returns.  However, a 15% drawdown on a trade will require 5 months of 3% returns to recoup the loss and get back to even.  This is why the Monthly Income Plan focuses on 5 star stocks signaling high quality stocks.

Why avoid the fattest premiums for a measly 3% monthly return?  The short answer is that high premiums often signal high risk, and writing calls on these options without regard to stock quality will eventually decimate your trading account.  There are two reasons that value premium becomes high enough to offer big returns:

1)   The stock is volatile and implied volatility is in line with the stock, or

2)   Implied volatility (IV) is significantly higher than actual volatility.

Simply, the higher the rate of return, the higher either actual or implied volatility (or both) must be on the options.  If two stocks had volatility of 60% we would expect the option premiums to be roughly comparable.  What if one stock had an IV of 25%?  This indicates a market expectation of less volatility in the future but it also means the investor is not getting paid for the 60% volatility risk he is taking on.  If the other stock had IV of 80% then the investor must determine what is causing the IV to be higher than the 60% actual volatility.  This usually indicates that the market is expecting some new event on the stocks such as news, announcement, earning or more.

If the IV is in line with the stock volatility, then the options are priced fairly so the decision comes down to – do you want to invest in the stock.  The rule is to AVOID stocks with spiking IV and look for a different trade.  To be conservative, look to write calls on stocks with a volatility of 40% or less.  If you are experienced and seek more income, look for stocks with volatility between 40% and 60%.  Anything above 60% I would consider high risk so proceed with caution.  You should at least look at the volatility of the stock before you invest to know what the risk of the trade may be over the coming option period.

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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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