If you’d like your money to work considerably harder than it does right now, then selling covered calls is absolutely essential.
This fantastic income-generating tool is best described as “do-it-yourself dividends” for stock investors or traders.
Why Sell Covered Calls?
According to 30-year stock market veteran and financial analyst, Michael Shulman, it’s all about maximum money and control.
- You sell covered calls for the same reason a smart entrepreneur goes out and raises the money he needs to make his business work… rather than sitting back and depending on the kindness of others.
- You sell covered calls for the same reason a talented chef creates his own signature dishes that command top dollar in superior restaurants… rather than churning out cheap fast food at the lowest possible price.
- You sell covered calls for the same reason a skilled salesperson goes out and prospects for the very best customers… rather than sitting back and taking orders from whoever walks in through the door.
In each of those comparisons, guess who makes the most money and has the most control over their future?
Who gets to be top dog, run their own company, and retire when they feel like it?
It’s always the person who stepped up to learn something new and then used that skill to outperform the herd.
Now let’s look at these DIY dividends…
“With covered calls, you money works harder—and often much harder,” says Shulman.
You can elevate your return on investment far above what you’ll ever see on standard, plain vanilla dividends.
- You can earn consistent, cash-cow income, even in flat or declining stock markets.
- You get to pick and choose from a variety of payout amounts and frequencies that best suit your specific needs.
- You’ll also reduce your average cost of owning the companies you like best.
Plus, you can control risk to meet your own personal comfort level—all while generating regular monthly income to supplement the quarterly or annual dividends everyone else gets.
All that aside, what is the single most important reason you should sell covered calls?
“Sheer necessity,” says Shulman.
How Selling Cover Calls Stacks Up to the Competition
If you’ve looked at interest rates lately, you already understand why a sizable income from routine investments is hard to come by.
Right now, a U.S. government 30-year bond yields a whopping 2.99% annually.
Would you be happy earning less than $3,000 on every $100,000 invested?
So how about dividends? Right now, the S&P 500 dividend yield is a paltry 2.11%. That’s even worse than bonds.
Sure, there are stocks that pay better than that. Macy’s and Emerson Electric offer 4.10% right now, for example.
But you’re still not getting much bang for your buck even then.
“There’s no question that the traditional means of generating investment income aren’t doing independent investors any favors,” Shulman says.
You need to do better.
If you’re serious about generating worthwhile income that can truly allow you to retire in comfort, then you absolutely must take matters into your own hands to gain a good return on your portfolio.
And that, in a nutshell, is why you should sell covered calls.
What to Expect
Do it right, and this strategy offers you a straightforward way to generate much, much more than a measly 2-4% a year on your money.
- Would you like to get up to 50% annual yield on your Apple (AAPL) stock, for example?
- Or generate up to 75% each year on one of the market’s best publicly traded private equity firms?
- You can also produce up to 105% a year on a popular (and growing) natural gas processor and transporter.
- Plus, there are many more plays just like these if you know where to look.
Now, any of the above numbers beats 2.99%, 2.11%, and even 4.10% by quite a wide margin.
But what you might not realize is that none of these bigger returns rely on high-risk bets or wild speculation.
You don’t need the market to go up very much. Or at all.
That means you can stop hoping for wins. Instead, just go ahead and get them through steady, low-risk cash transactions month after month.
So How Does It All Work?
By now, you must be wondering how to make these “do-it-yourself dividends” happen in your own account.
The basic concept is very simple, actually.
It’s a bit like renting out real estate for income, except it’s much more liquid and very easy to implement.
There are no tenants from hell, no local bylaws or other nightmare legislation to deal with, and no waiting until eternity to sell if you decide if it’s time to move on.
But the main idea is similar: You own an asset (a favorite stock or basket of stocks). And you offer it to a “renter” for a regular payment each month or quarter or whatever best fits your income needs.
The name of the game is accumulating cash, reducing your risk and turning an asset with, at best, 4% annual cash flow into something that generates that kind of payday every month.
If you’d like to learn more about selling covered calls, Michael Shulman is hosting a free webinar to help independent investors get started on the simple, repeatable strategy of selling covered calls safely, skillfully and profitably.