If you're at or near retirement age, you've probably heard a
dangerous myth repeated often in the media by so-called financial
Your own broker, money adviser or mutual fund manager may have
repeated this myth to you dozens of times.
And it's a myth that's so powerful and common that I know
you've read about it in the pages of this very newsletter. It may
have prevented you from fully enjoying your retirement, or caused
you to worry that you won't have enough money when you do
Maybe you're putting off the purchase of a new car or a fancy
vacation … until things change…
It's the idea that a "low-interest rate" environment means you
CAN'T earn a substantial income from your current nest egg.
Simply put, low interest rates shouldn't stop you from safely
earning high rates of interest from your investments.
And I want to prove to you that you can SAFELY earn 8-12% in
income each year - without going out of your comfort zone as an
In fact, I believe you can earn this type of income without
doing anything differently - without buying risky stocks, or
using complicated day-trading techniques or margin.
You probably realize that bonds and CDs are a no-go if you
Unless you have well over $1 million in the bank, a 1% savings
account rate won't cut it. And even then, you'd only collect
We have to do better.
So if you're like most investors, you've headed to the stock
market. I can't blame you. Stocks are clearly a better deal. You
can safely collect 2-5% on blue chip dividend payers.
But that's still not even a historically average interest
rate. So how do you get to 8% … or even 12%?
All you have to do is learn one simple transaction - which
thousands of investors use everyday - to collect extra income
from dividend stocks you already own.
All you need do to produce this income is sell calls on shares
you already own. This is known as a "covered call" strategy.
Here's how it works:
Suppose you own 100 shares of
and you think the stock won't go much higher, if at all, over the
next few months. Microsoft is trading at around $29.50. You can
sell a June call - the right to own 100 shares - at a strike
price of $31 and pocket a "premium," in this case, of almost
Before I go on, it's important to understand why someone would
want to pay you this income up front. Simply put, most investors
are gamblers. They like to make a bet that your stock will go
higher. They're essentially betting you that your stock will go
above a certain price - and paying you this bet up front.
But the thing is, if Microsoft shares stay below $31 by the
third Friday in June when the option expires, the "bet" is yours.
In fact, the bet is yours no matter what.
The bet or "premium" received also gives some downside
protection - $40 compensates for a $0.40 drop in the share price,
equivalent to roughly a 1.5% decline in the stock.
The trade-off is that writing a covered call can cap your
upside. In this case, your position benefits up to a $31 stock
price. Any gain in the stock beyond $31 is essentially "owned" by
the call buyer. So the maximum gain is $1.50 in stock
appreciation ($31.00 - $29.50) plus the $0.40 in premium.
If the stock moves above $31, the option will likely be
exercised and your shares will be called away. But you could make
an additional 6.7% return over the course of the year if you
choose to use this successful strategy. With an annual dividend
of 3.2% you have the potential to boost your income to 9.9% with
a few, simple steps.
You can quickly see why so many professional money managers
are using this strategy for investors who seek income,
Over the next several weeks I will discuss the strategy in
greater detail. In the meantime, feel free to contact me at
firstname.lastname@example.org with any questions that you might
have at any time. I would be more than happy to discuss with you
what I feel is the future for income investing.
The Strike Price