If You Are Overthinking About Investing and Time is Passing By, This is What Happens

Friends, Colleagues, and even Family Members ask me, “Joey, Why are you so committed to investing?”

It is a question that makes me both happy but also sad.

Happy because everyone around me sees my commitment to my financials. But also Sad because they still don’t understand what moves me.

My goal is that by the end of this article, you will understand my point of view towards the future and take action to help yourself along the way.

I got involved in the markets during the 2008-2009 crash. Believe me or not, it was one of the best times to get involved in the markets because it quickly taught me that it was not easy, especially if you were a trader more than an investor.

Although trading is exciting, it takes time to analyze the markets daily. Try to find what is moving and catch the perfect windows to jump in and out. Unfortunately, it is an ideal recipe for burning out quickly.

On the other hand, let’s say that I’m lazy. I don’t want to be stuck to my computer all day looking for opportunities. So use that time in other productive activities while the markets do their thing, and you still get paid for being patient.

Be part of the disruption and get free stocks when you open a Robinhood account. Also, enjoy your fractional shares and commission FREE!

To answer the first question, “why am I so committed,” is because I realized the earlier you begin investing, the sooner you can reach your goal and the less time you have to spend working for someone else. Understand that I said “Investing” and not “Trading.”

Most financial advisors teach individuals about the 4% rule at retirement. Unfortunately, that is a horrible strategy because it involves withdrawing 4% of your capital to live and cover expenses every year. As a result, most people will have little to no money towards the end of their years.

It puts a severe amount of pressure on their kids and family members. Now, they have to cover their expenses and yours as well.

Who wants to put that pressure on their kids?

I’m pretty sure no one does. That is why I have an alternate strategy that will work wonders for everyone.

The idea is to invest in assets that will cash flow enough money to cover your expenses while leaving your capital intact. Then, when we die, our kids or family members can inherit that capital (investments) and make their lives easier.

With Fundrise, you can become a digital landlord anywhere in the United States without the hassle.

How it works:

Although there are several cash flow assets, we will concentrate on dividend-paying stocks and ETFs.

Why?

Because when you invest in dividend-paying stocks and ETFs, you have several ways of making money. The most common one is capital gains as time passes. If they increase their dividends with time, your cash flow also increases. You can also learn how to sell covered calls and other income strategies to bring even more money each month.

While all of this is happening, you are not depleting your capital. Meaning your net worth will never decrease. On the contrary, you can keep increasing your net worth while living the life you want.

So, What happens if you keep postponing your investing?

In simple words, you won’t have enough cash flow to retire comfortably.

One of two things happen:

1. You can’t retire; hence, keep working longer.

2. You have to increase the money you invest to catch up.

With Robinhood you can get cash dividends from well-known and established companies like Coca-Cola (KO).

Let’s look at an example:

Mimi and Joey both begin with a $3,000 initial investment. After that, both invest $300 monthly and receive an average annual return of 8.5%. Mimi is 20 years old, while Joey is 30 years old.

In 10 years, they both have $60,826.

In 20 years, they both have $190,935.

In 30 years, they both have $485,107.

And this is where things take a turn. Joey was 30 when he began investing and is now 60 years old and ready to retire.

Meanwhile, Mimi has another 10 years of compounding before she turns 60 years old, which will end up with a portfolio worth $1,150,226.

Who will have a better life using the 4% rule?

If they both use the 4% rule at retirement, Joey will be receiving $19,404 from his withdrawals. On the other hand, Mimi will be receiving $46,009 for her withdrawals.

You can say that Mimi will have a better life because she will receive more than double what Joey will receive. He will have to figure out how to live on $19,404 a year. However, both of them will run out of money by age 85.

Why?

Because regardless of how big your portfolio is, if you withdraw 4%, you will deplete your account in 25 years.

Just do the math:

Joey – $19,404 * 25 years = $485,100

Mimi – $46,009 * 25 years = $1,150,225

In the end, neither one will have anything to give to their kids, and if they live past their 85 birthday, their families will have to support them for the rest of their lives.

From the comfort of your home, invest anywhere in the united states with Fundrise.

What if they cash flow instead of withdrawing capital?

Now, this is where my strategy beats the financial advisors. Instead of withdrawing capital, we can build a dividend-paying stock and ETFs portfolio. The investments can be paying 3%-4% today, but if they increase their dividend payouts yearly, by the time you are 60 years old, you could be receiving dividend payouts well above 6%-8%.

Using this conservative estimate, Joey could receive anywhere between $29,106 to $38,808 in dividends. But, of course, it could be higher if Joey learns how to sell covered calls or other income strategies.

As for Mimi, she could receive between $69,013 to $92,018 in dividends. But, again, it could be higher if she learns the strategies previously mentioned.

I think both of them could live comfortably with those amounts, and the best part is they will never run out of money. Their portfolios will remain the same or even increase. Then, when their time is up, and they move on to a better place, their families will inherit their money, or they could give their money to charity.

It is your money, so do with it what you feel is the right thing to do.

Sin companies that pay your expenses and more.

Key takeaways:

  • The sooner you begin, the sooner you will reach your goals.
  • Concentrate on cash flowing assets instead of accumulating money to withdraw in retirement
  • Teach your kids and family members, so they too have a better life
  • The 4% rule is widespread; however, it is flawed
  • The more you postpone investing, the more money you will have to invest in catching up.
  • Begin your investing journey today

Note:

If Joey wants to have the same amount as Mimi by age 60, he will have to invest $750 instead of $300. That leaves Joey with $450 less each paycheck. So don’t be like Joey. Start now!

Now, begin your Road to Wealth!

Leave your comment below. If you liked it, pay it forward. Please share it on social media and help others become successful as well. Your success will be the result of two things: Knowledge and Action.

Follow me on TWITTER, PINTEREST, INSTAGRAM, LINKEDIN, and FACEBOOK for more posts and updates. You can also reach me here with any questions.

If you are not receiving dividends, you are missing out!

DISCLAIMER: Please read our disclosure policy here. This post contains affiliate links, and I earn from qualifying purchases at no cost to you. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. Road-to-wealth.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles, and other features are for educational purposes only and should not be construed as investment advice. Information for any trading observations is obtained from sources believed to be reliable. Still, we do not warrant its completeness or accuracy or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk, and it is your sole responsibility to evaluate the information’s accuracy, completeness, and usefulness. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.

Cómo Funciona un Covered Call Para Un Pequeño Inversor

En el famoso Viernes 13, miré mi cuenta de Twitter. Tenía ganas de hablar con la gente y responder mi opinión sobre varios temas de inversión y el mercado en general.

Vi una publicación (no voy a mencionar nombres porque no pedí permiso) donde mencionaba los ‘covered calls‘, una de sus principales fuentes de ingresos a través de su cartera de inversiones.

Entre los comentarios, hubo uno que me llamó la atención y decía:

“Todavía estoy aprendiendo. Tengo un ‘call’ de $50 en Verizon ($VZ) que vence en Junio del próximo año. ¿Existe una mejor manera de hacer esto que no sea comprar y esperar?”

Respondí:

“Sí. Vende ‘covered calls’ semanales o mensuales. Obtendrás ingresos todos los meses aparte de los dividendos cada tres meses (Verizon paga dividendos trimestrales). Reinvierte las ganancias. Un ‘call’ que expira en un año solo te congela tu dinero.”

El me dice:

“¿Podría explicarme un ‘covered call’ como si tuviera 6 años? Entiendo perfectamente los ‘call’ y ‘puts’, solo que no entiendo nada más allá de eso. Así que hice esa opción realmente para aprender y porque era muy barata. Así que pensé, ¿Por qué no?”

Quiero decir que ‘Te felicito’ y ‘Muchas Gracias’.

Te felicito porque no muchos tienen el valor de aceptar que aún no tienen el conocimiento necesario y tienen miedo de pedir ayuda, en especial en público, como es la red de Twitter.

Muchas gracias porque acabo de llegar de vacaciones de la isla de Puerto Rico y no estaba seguro de que escribir. Me permites ayudarte a ti y a otros que se encuentren en una posición similar de aprendizaje.

Primero hagámoslo de esta manera, daré un ejemplo de un niño inversionista, luego cubriré que es un ‘covered call’, sus riesgos y beneficios, y terminaré con dos ejemplos de la vida real en los que estoy activamente manejando.

Conclusiones clave:

* ¿Qué es un ‘covered call’?

* Riesgos de esta estrategia

* Beneficios de esta estrategia

* Ejemplos reales

Sea parte de la disrupción y obtenga acciones gratis cuando abres una cuenta con Robinhood. ¡Además, disfrute de sus acciones fraccionales y comisión GRATIS!

El pequeño inversor

Digamos que tienes 6 años y compras 100 carritos hot-wheels por $2. Sin embargo, desea venderlos en el futuro a un precio más alto. Un ‘covered call’ te da la opción de venderlos a un precio más alto en el futuro a la vez que obtiene ingresos mientras mantienes los carritos en tu posesión.

Por lo tanto, le vendes la opción a Juanito de comprarte los carritos a $2.50 si los carritos valen $2.50 o más en el futuro. Juanito te paga un crédito, digamos $0.50, por tener la oportunidad de comprar esos carritos.

En una fecha estipulada en el futuro, digamos dentro de un mes, sucederá una de dos cosas.

1. Los carritos valen $2.50 o más. Juanito vuelve a ti para comprar los carritos. Se lleva tus carritos y te paga los $2.50. Usted se queda con los $0.50 que te pagó por el contrato y recibes los $2.50 por carrito en efectivo.

Tienes el efectivo y el crédito para regresar y hacer otra inversión. Generaste una ganancia de $0.50 por carrito ($2.50 precio de venta – $2 costo) más el crédito de $0.50.

2. Los carritos aún no han aumentado su valor por encima de $2.50. El contrato expira. Como no vale más de $2.50, Juanito no querrá ejercer su contrato ya que puede conseguir los carritos en el mercado por un precio más bajo. Juanito pierde $0.50 que te quedas.

Así que te quedas con los $0.50 del contrato y mantienes tus carritos en tu posesión. Te permite realizar un nuevo contrato para el próximo mes, generando más ingresos mientras sigues reduciendo el costo de tus carritos.

Desde la comodidad de su hogar, invierta en cualquier lugar de los Estados Unidos con Fundrise.

¿Qué es un ‘covered call’?

Es una estrategia de ingresos que ayuda a los inversores a generar ingresos adicionales a los dividendos (si la empresa paga dividendos) y a las ganancias de capital sobre las acciones o ETFs que ya manejas en tu portafolio.

Riesgos de ‘covered calls’

Existen dos tipos de riesgos:

1. El riesgo más considerable en el que incurrimos es que limitamos nuestras ganancias en la apreciación de precio.

Por ejemplo, compramos 100 acciones a $45 y vendemos un ‘call’ a $50. Limitamos nuestras ganancias a $5 por acción ($50 – $45) más el crédito que recibimos. Si la acción sube por encima de $50, la persona que compró el ‘call’ ejercerá su opción de comprarnos a $50 y venderlos al precio del mercado actual.

2. El otro tipo de riesgo es si el precio de las acciones baja demasiado desde donde nosotros compramos porque cuanto más lejos se encuentre el precio de nuestro costo efectivo, el crédito que recibimos también disminuye.

Beneficios de ‘covered calls’

1. La venta de ‘covered calls’ nos provee ingresos semanales o mensuales según la compañía. Algunas compañías como Verizon, venden opciones semanales. Otras, como MPLX LP, venden opciones mes a mes.

2. Independientemente del precio después de vender un ‘covered call’, el crédito que recibimos es nuestro para hacer lo que queramos.

Compre acciones enteras o fraccionadas de sus acciones favoritas, ya sea de Tesla (TSLA) o de cualquier otra empresa, sin comisiones con Robinhood.

Posibles resultados

Cuando vendemos ‘covered calls’, existen 2 posibilidades:

1. El precio de la acción sube más que el precio establecido por nuestra venta. En este punto, es muy probable que el comprador ejerza su opción y tome nuestras acciones. Entonces, automáticamente, el equivalente del dinero aparece en nuestra cuenta como efectivo, y desaparecen nuestras acciones.

En este ejemplo, realizamos ganancias de capital más cualquier crédito que hayamos recibido. Ahora empezamos a buscar otra inversión para repetir el proceso.

2. El precio de la acción se mantiene por debajo del precio establecido por nuestra venta. En este punto, la opción pierde la mayor parte o la totalidad de su valor, generando nuestro ingreso del crédito, y mantenemos nuestras acciones intactas para poder repetir el proceso.

En este ejemplo, tenemos 2 opciones:

          a. Podemos esperar a que caduque la opción y suba al cielo de las opciones. Ocurre los viernes, ya sea semanal o mensualmente dependiendo de la disponibilidad de las opciones. Luego, cuando el mercado abre el lunes siguiente luego de la expiración, volvemos a vender otro ‘call’ con una nueva fecha de expiración en el futuro.

          b. Podemos hacer lo que se llama un ‘roll over’ de la posición, lo que significa que compramos/cerramos la posición actual antes de que caduque por un precio bajo entre $1 a $5 y vendemos/abrimos una nueva posición por un crédito a una nueva fecha en el futuro.

Depende de usted como inversor decidir que opción ejecutar. Es tu portafolio y lo debes manejar a tu manera. Ambas opciones son factibles.

Ejemplos reales:

Antes de entrar en los ejemplos, hay 2 requisitos para que esto funcione.

1. Debes estar autorizado para comprar y vender opciones.

2. Debes poder comprar al menos 100 acciones de la empresa de su interés.

Cada opción consta de 100 acciones. Por lo tanto, si no tienes al menos 100 acciones en tu cartera, no puedes vender contratos de opciones contra esa posición. La parte que se refiere a ‘covered’ significa que tus 100 acciones son garantía para esa posición.

Con Fundrise puedes ser un propietario digital en cualquier lugar de los Estados Unidos, sin complicaciones.

MPLX LP ($MPLX)

1. La fecha ex-dividend para MPLX LP ($MPLX) era el 5 Mayo 22. Si deseamos recibir su dividendo, teníamos que comprar las acciones el 4 de Mayo. Eso fue precisamente lo que hice.

El 4 de Mayo compré 100 acciones a $33 para una inversión de $3,300. Vendí el ‘call’ de $33 con expiración el 20 Mayo 22 por un crédito de $40.

Me dejó con dos opciones:

1) el precio cierra por debajo de $33, y me quedo con el crédito de $40 y las acciones para recibir el dividendo de $70 ($0.70 * 100 acciones). Al quedarme con las acciones, podía seguir vendiendo ‘covered calls’ en el futuro.

2) el precio cerraba por encima de $33 y mis acciones se asignan a la persona que compró mi ‘call’. Me depositaban $3,300 en mi cuenta y mis acciones desaparecían.

La segunda opción fue lo que pasó.

Por un par de horas de sostener las acciones, recibí un crédito de $40. Después de eso las acciones desaparecieron y mis $3,300 regresaron a mi cuenta en efectivo. Me dejó $3,340 para repetir el proceso.

Empresa Tabacalera Pagando Altos Dividendos Cubre
Tus Gastos

Intel Corporation ($INTC)

Al igual que $MPLX, Intel Corporation tenía una fecha ex-dividend del 5 de Mayo, pero la diferencia es que $INTC tiene opciones disponibles semanalmente.

Así que el 3 de Mayo compré 100 acciones por $45.40 para una inversión de $4,540. Vendí el ‘call’ que vencía el 6 de Mayo a $46 por un crédito de $38.

Dado que el precio de $INTC estaba por debajo de $46 le 6 de Mayo, el valor de la opción perdió la gran mayoría de su valor, cayendo a $3. Por lo tanto, decidí renovar  esa posición antes del final del día, comprando la posición por $3 y vendiendo/abriendo una nueva posición por crédito de $54 que vencía el 13 de Mayo.

El precio de $INTC ha bajado, con el resto del mercado rondando los $43.64 al cierre de ayer. Por lo tanto, hice otro ‘rollover’, cerré la posición por $2 y vendí/abrí otra posición que expira el 20 de Mayo por un crédito de $27.

Actualmente tengo una pérdida en el valor de las acciones de $INTC de ($176). Sin embargo, he recibido en créditos $114 en dos semanas. Aquí está el desglose:

Crédito: $38

Débito: $3

Crédito: $54

Débito: $2

Crédito: $27

Sumando los créditos ($119) y restando los débitos ($5) nos da $114. Agregue a esto el dividendo de $36.50 ($0.365 dividendo * 100 acciones) que recibiré el 1 de Junio ya que poseía las acciones el 5 de Mayo, y tenemos un total de $150.50 ($114 + $36.50).

Seguiré haciendo este proceso hasta que, en el futuro, el precio de $INTC se recupere a $46 o más. Luego, mis acciones se asignan a otra persona, lo que me devuelve mi dinero en forma de efectivo y me permite comenzar el proceso con una nueva posición en $INTC o en otra compañía.

¿Qué Acción de Petróleo Es Una Mejor Compra? Exxon Mobil (XOM) o Enbridge (ENB)

Nota: Tenemos varias cosas a tener en cuenta.

1. Si queremos mantener nuestras acciones, según el precio recupere, podemos vender ‘covered calls’ a precios más altos como $48, $50, etc. Esto no solo nos sigue dejando ingresos semanales o mensuales a través de créditos, sino que también aseguramos ganancias de capital más grandes.

2. Si el precio de las acciones sigue cayendo con el mercado, pueden suceder dos cosas:

          a. Los créditos disminuyen si continuamos vendiendo los ‘covered calls’ al mismo precio que comenzamos.

          b. Nos vemos obligados a vender ‘covered calls’ a precios más bajos del que comenzamos. Lo cual disminuye la ganancia de capital cuando las acciones se asignan a otra persona. Sin embargo, los créditos deben ser más altos ya que nos estamos acercando al precio actual de las acciones.

Espero que esto pueda ayudarlo a comprender y aprender otras formas de ganar dinero en el mercado. Si desean leer de otras fuentes, haga clic en este enlace de Investopedia.

¡Ahora, comience su camino hacia la riqueza!

Deja tu comentario a continuación. Si te gustó, compártelo en las redes sociales y ayuda a otros a tener éxito también. Su éxito será el resultado de dos cosas: conocimiento y acción.

Sígueme en TWITTER, PINTEREST, INSTAGRAM, LINKEDIN, y FACEBOOK para obtener más publicaciones y actualizaciones. También puede comunicarse conmigo aquí si tiene alguna pregunta.

Disclaimer: Lea nuestra política de divulgación aquí. Esta publicación contiene enlaces de afiliados y yo gano con las compras que califican sin costo alguno para usted. Existe un alto grado de riesgo involucrado en la bolsa de valores. Los resultados pasados no son indicativos de rendimientos futuros. Road-to-wealth.com y todas las personas afiliadas a este sitio no asumen ninguna responsabilidad por sus resultados comerciales e inversiones. Los indicadores, estrategias, columnas, artículos y otras características son solo para fines educativos y no deben interpretarse como consejos de inversión. La información para cualquier observación comercial se obtiene de fuentes que se consideran confiables. Aún así, no garantizamos su integridad o precisión ni garantizamos ningún resultado del uso de la información. El uso que usted haga de las observaciones comerciales es bajo su propio riesgo y es su exclusiva responsabilidad evaluar la precisión, integridad y utilidad de la información. Debe evaluar el riesgo de cualquier operación independientes con respecto a los valores mencionados en este documento. No somos asesores financieros y esta publicación es solo para fines educativos. Invertir conlleva riesgos. Asegúrese de visitar a un profesional que pueda diseñar una mejor estrategia para cumplir con sus objetivos personales y circunstancias actuales.

How a Covered Call Works for a Small Investor

On the famous Friday the 13th, I was scrolling my Twitter account. I felt like talking to people and answering my opinion on various investment issues and the market in general.

I saw a post (I’m not going to mention names because I didn’t ask for permission) where he mentioned covered calls, one of his primary sources of income through his investment portfolio.

Among the comments, there was one that caught my attention and said:

“I’m still learning. I have a $50 call on Verizon ($VZ) which expires in June of next year. Is there a better way to do this than buy and wait?”

I answered:

“Yes. Sell weekly or monthly covered calls. You’ll get income every month apart from dividends every three months (Verizon pays quarterly dividends). Reinvest profits. A call that expires in a year freezes your money.”

He tells me:

“Could you explain a covered call to me like I’m 6 years old? I understand calls and puts perfectly. I don’t understand anything beyond that. So I did that option really to learn and because it was so cheap. So I thought, why not?

I want to say I congratulate you and Thank you very much.

I congratulate you because not many dare to accept that they still do not have the necessary knowledge and are afraid to ask for help, especially in public, as is the Twitter network.

Thank you very much because I just got back from vacation from the island of Puerto Rico and I wasn’t sure what to write. You allow me to help you and others in a similar learning position.

Let’s do it this way first, I’ll give an example of a child investor, then I’ll cover what a covered call is, its risks and benefits, and I’ll finish with two real-life examples that I’m actively managing.

Key takeaways:

* What is a ‘covered call’?

* Risks of this strategy

* Benefits of this strategy

* Real examples

Be part of the disruption and get free stocks when you open a Robinhood account. Also, enjoy your fractional shares and commission FREE!

The Small Investor

You’re 6 years old, and you buy 100 hot-wheels cars for $2. However, you want to sell them in the future at a higher price. A ‘covered call‘ gives you the option to sell them at a higher price in the future while earning you income while keeping the cars in your possession.

Therefore, you sell the option to Juanito to buy the cars from you for $2.50 if the cars are worth $2.50 or more in the future. Juanito pays you a credit, let’s say $0.50, for having the opportunity to buy those cars.

At a stipulated date in the future, say a month from now, one of two things will happen.

1. Cars are worth $2.50 or more. Juanito returns to you to buy the cars. He takes your cars and pays you the $2.50. You keep the $0.50 he paid you for the contract and receive the $2.50 per car in cash.

You have the cash and credit to go back and make another investment. You generated a profit of $0.50 per car ($2.50 sale price – $2 cost) plus the $0.50 credit.

2. Cars have not yet increased in value above $2.50. The contract expires. Since it is not worth more than $2.50, Juanito will not want to exercise his contract since he can get the cars at a lower price. Juanito loses $0.50 that you keep for yourself.

So you keep the $0.50 contract and keep your cars in your possession. It allows you to make a new contract for the next month, generating more income while you continue to reduce the cost of your cars.

From the comfort of your home, invest anywhere in the united states with Fundrise.

What is a ‘covered call’?

It is an income strategy that helps investors generate income in addition to dividends (if the company pays dividends) and capital gains on the stocks or ETFs that you already manage in your portfolio.

Risks of ‘covered calls’

There are two types of risks:

1. The most considerable risk we incur is that we limit our profits on price appreciation.

For example, we buy 100 shares at $45 and sell a call at $50. We limit our earnings to $5 per share ($50 – $45) plus the credit we receive. If the stock rises above $50, the person who bought the call will exercise their option to buy $50 from us and sell it at the current market price.

2. The other type of risk is if the share price falls too low from where we buy because the further the price is from our effective cost, the credit we receive also decreases.

Benefits of ‘covered calls’

1. Selling ‘covered calls’ provides weekly or monthly income depending on the company. Some companies, like Verizon, sell weekly options. Others, like MPLX LP, sell options on a month-to-month basis.

2. Regardless of what price does after selling a covered call, the credit we receive is ours to do with as we please.

Buy whole shares or fractional shares of your favorite stocks, whether Tesla (TSLA) or any other company, commission-free with Robinhood.

Possible results

When we sell ‘covered calls,’ there are 2 possibilities:

1. The stock price rises more than the price established by our sale. At this point, the buyer is very likely to exercise his option and take our shares. Then, automatically, the equivalent of the money appears in our account as cash, and our shares disappear.

In this example, we realize capital gains plus any credit we have received. Now we start looking for another investment to repeat the process.

2. The share price remains below the established price by our sale. At this point, the option loses most or all of its value, generating our credit income, and we keep our shares intact so we can repeat the process.

In this example, we have 2 options:

          a. We can wait for the option to expire and go up into the options heaven. It happens on Fridays, either weekly or monthly depending on the availability of the options. Then, when the market opens the following Monday after the expiration, we go back to sell another call with a new expiration date in the future.

b. We can do what is called a ‘roll over’ of the position, which means that we buy/close the current position before it expires for a low price between $1 to $5 and sell/open a new position for a credit to a new date in the future.

As an investor, it is up to you to decide which options to execute. It is your portfolio, and you must manage it your way. Both options are feasible.

Real examples:

Before we get into the examples, there are 2 requirements for this to work.

1. You must be authorized to buy and sell options.

2. You must be able to buy at least 100 shares of the company of your interest.

Each option consists of 100 shares. Therefore, if you do not have at least 100 shares in your portfolio, you cannot sell options contracts against that position. The part that refers to ‘covered’ means that your 100 shares are collateral for that position.

With Fundrise, you can become a digital landlord anywhere in the United States without the hassle.

MPLX LP ($MPLX)

1. The ex-dividend date for MPLX LP ($MPLX) was May 5, 22. If we wanted to receive its dividend, we had to buy the shares on May 4. That’s precisely what I did.

On May 4th, I bought 100 shares at $33 for an investment of $3,300. I sold the $33 call expiring May 20, 22, for a $40 credit.

It left me with two options:

1) the price closes below $33, and I keep the $40 credit and the shares to receive the $70 dividend ($0.70 dividend * 100 shares). By keeping the shares, I could continue to sell covered calls in the future.

2) the price closes above $33, and my shares get assigned to the person who bought my call. So I had $3,300 deposited into my account, and my shares disappeared.

The second option was what happened.

For a couple of hours of holding the stock, I received a $40 credit. After that, the shares disappeared, and my $3,300 returned to my account as cash. It left me with $3,340 to repeat the process.

Get This High Dividend Tobacco Company Cover Your Expenses

Intel Corporation ($INTC)

Like $MPLX, Intel Corporation had an ex-dividend date of May 5, but the difference is that $INTC has options available weekly.

So on May 3rd, I bought 100 shares for $45.40 for an investment of $4,540. I sold the call expiring on May 6 at $46 for a $38 credit.

Since the price of $INTC was below $46 on May 6, the option’s value lost the vast majority of its value, falling to $3. Therefore, I decided to roll over that position before the end of the day, buying the position for $3 and selling/opening a new position for $54 credit expiring May 13.

The price of $INTC is down, with the rest of the market hovering around $43.64 at yesterday’s close. Therefore, I did another ‘rollover,’ closing the position for $2 and selling/opening another position expiring on May 20th for a credit of $27.

I currently have a loss in the value of $INTC shares of ($176). However, I have received $114 in credits in two weeks. Here is the breakdown:

Credit: $38

Debit: $3

Credit: $54

Debit: $2

Credit: $27

Adding the credits ($119) and subtracting the debits ($5) gives us $114. Add to this the dividend of $36.50 ($0.365 dividend * 100 shares) that I will receive on June 1 since I held the shares as of May 5, and we have a total of $150.50 ($114 + $36.50).

I will keep doing this process until, in the future, the price of $INTC recovers to $46 or higher. Then, my shares get assigned to someone else, giving me my money back in the form of cash and allowing me to start the process with a new position either at $INTC or another company.

Which Oil Stock Is A Better Buy? Exxon Mobil (XOM) or Enbridge (ENB)

Note: We have several things to keep in mind.

1. If we want to keep our shares, depending on the price recovers, we can sell ‘covered calls’ at higher prices like $48, $50, etc. Not only does this continue to leave us weekly or monthly income through credits, but we also ensure more significant capital gains.

2. If the stock price continues to decline with the market, two things can happen:

          a. Credits decrease if we continue to sell covered calls at the same price we started.

          b. We are forced to sell covered calls at lower prices than initially started. It decreases the capital gain when shares get assigned to someone else. However, the credits must be higher since we are approaching the current share price.

I hope this can help you understand and learn other ways to make money in the market. If you want to read from other sources, click on this Investopedia link.

Now, begin your Road to Wealth!

Leave your comment below. If you liked it, pay it forward. Please share it on social media and help others become successful as well. Your success will be the result of two things: Knowledge and Action.

Follow me on TWITTER, PINTEREST, INSTAGRAM, LINKEDIN, and FACEBOOK for more posts and updates. You can also reach me here with any questions.

DISCLAIMER: Please read our disclosure policy here. This post contains affiliate links, and I earn from qualifying purchases at no cost to you. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. Road-to-wealth.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles, and other features are for educational purposes only and should not be construed as investment advice. Information for any trading observations is obtained from sources believed to be reliable. Still, we do not warrant its completeness or accuracy or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk, and it is your sole responsibility to evaluate the information’s accuracy, completeness, and usefulness. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.

24% Dividend Idea with BTI, Short-Term Hold

Although we covered a more in-depth analysis of (BTI) British American Tobacco in this article, today, I realized a play that can be very beneficial within the next few days.

BTI goes ex-dividend on 22 December 2021. That means that everyone who buys shares on or before 21 December 2021 will receive a dividend payout.

The idea is simple, but you have to afford to buy 100 shares. At the current price of $37.30 on 20 December 2021, it will cost $3,730. Before you ask, Yes, you can still buy shares of BTI if you don’t have the whole amount needed; you won’t be able to complete the entire strategy, though. But you can always learn it for later. Buying shares will only give you the dividend.

Let’s try to catch a dividend here.

Get free stocks when you open a Robinhood account.

I bought 100 at $37.26 for a total of $3,726. Therefore, BTI will pay a dividend of $0.74, bringing in $74. For those of you who are newer, you multiply the number of shares (100) by the amount of the dividend paid ($0.74). That’s how you calculate how much you will receive.

On the 22nd, I will sell a call option, the $35 Call expiring on 21 January 2022, to be exact. It is currently trading for $2.30. If BTI keeps increasing in value, it could sell for that or more. To keep it simple, let’s use the current price.

As long as BTI remains above $35 by the expiration date of 21 Jan 22, my shares will be called away at a standard price of $35 per share.

Let’s do the math:

100 shares at $35 = $3,500

Credit for selling the call is $2.30 * 100 shares = $230

The dividend, as previously established, is $74

Add it all up, and you get $3,804. So my total investment was $3,726, which gives me a $78 profit in exactly 31 days for a little over 5 minutes of work. That is an annualized gain of 24.87% for sitting on my hands.

Are you receiving a 24% profit anywhere else? If not, this is an opportunity you can try with dividend-paying stocks.

Now, begin your Road to Wealth!

Leave your comment below. If you liked it, pay it forward. Please share it on social media and help others become successful as well. Your success will be the result of two things: Knowledge and Action.

Follow me on TWITTER, PINTEREST, INSTAGRAM, LINKEDIN, FACEBOOK for more posts and updates. You can also reach me here with any questions.

From the comfort of your home, invest anywhere in the united states with Fundrise.

DISCLAIMER: Please read our disclosure policy here. This post contains affiliate links, and I earn from qualifying purchases at no cost to you. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. Road-to-wealth.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles, and other features are for educational purposes only and should not be construed as investment advice. Information for any trading observations is obtained from sources believed to be reliable. Still, we do not warrant its completeness or accuracy or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk, and it is your sole responsibility to evaluate the information’s accuracy, completeness, and usefulness. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.