put aside 20k to get passive income what would be best options?
working full time, plus family - making impossible to sit for online trading...
- Selling covered calls is a good way to generate income. Buy 100 shares of a stock you want to own and sell one out-of-the-money call. You keep the premium you sold the call for. If the stock goes above the strike price your shares sell for the strike and you keep the profit. You want the stock to stay flat or go up a little bit, but not enough that your shares get called away. You can do this as many times as you want with the same stock. I do it with Ford, selling calls 30 days out from expiration - I collect a 7% dividend, 5-7% annual return on my calls, and I hold the stock. Virtually no time investment required.
- If stock stays still, you make money from the call option.
If stock goes up, you make money from the call option, but less money than simple buy low sell high.
If stock goes down, you make money from the call option, but lose more from the drop of stock price.
Can you explain why this is a better than buying a stock and betting it to go up?
- Lol okay Facebook. Why don't you go learn some things about real grown-up options trading, not that wall streets bets naked calls/puts earnings shit where IV crush kills your position even if you get the direction of the move right. Or don't. Just don't try to speak with authority on topics you obviously know nothing about.
If you have a portfolio of stocks with at least 100 shares of each you'd be stupid to not sell calls against those positions every month. If your shares get called away you can just buy them back on the open market and sell calls against them again. Meanwhile idiots like you will buy the calls from me to make "earnings plays".
- @google you own the stock so you do want it to go up. You sell calls far enough out of the money that shares don't get called away that often. Even if they do get called away, you made profit and you can buy them back immediately and sell another OTM call if you still want to own the stock.
Another strategy is to sell naked OTM puts at a price for a stock you DONT own but want to, at a specific price. Then you essentially get paid to wait to buy the stock and if the price drops to the price you want, your puts get exercised and you buy the stock at the price you wanted to pay anyways.
- For example - if I own 100 shares of Ford and sell a call with a $9.00 strike, the ideal case is if the call expires but the shares close at $8.99 on expiry day. I made the most possible amount of money on the stock while keeping the shares and I also cashed the premium on the call I sold. Then I sell another call, 30 days out, 10% or so out of the money.
With more volatile stocks you go further OTM. Options price such that volatity increases the width of the strikes that you can get a decent return on.
- You would win prolly 90% of the time on Ford. But the 10% you do lose, your opportunity cost is high.
An alternative is to just iron condor with something like SPYD (SPY high dividend) if you want. That way you make some $ in both directions and add protect (which of course has a cost)
Yeah the IV crush is real 😭 but you CAN still make a massive amount of $ on a gamble (but at that point you better hope you have better inside information than the ppl selling to you)
Also - why did you pick Ford? Why not AT&T or some high return REIT?
- Ford because I want to own the stock.
Iron condors don't give you any exposure to the underlying meaning you don't get to collect the dividend of the underlying because you never own the shares.
I set my strike for the short call 2 standard deviations away from the mean, so I expect to get called 5% of the time. But if you want to be active, you can defend your short call to avoid losing the shares. This works well if you're closer to expiration because theta decay will have done its work. I normally don't defend, but sometimes it makes sense.
- Oh right. Yeah so if U want Ford (presumably long term), and think it won’t spike upwards, that’s the best plan. That’s a very reasonable assumption. But owning ford stock also has the downfall that the stock itself may just keep going down slowly (so that’s why the dividend rate seems slightly higher). Still a decent play overall, just a little action requiredJan 81
- It is passive if you use sex dolls instead of humans.
German sexdoll brothel: