Last week, more than 300 people tuned in for my exclusive
webinar. During this one hour investing seminar, I share my
single best strategy for earning extra income.
The unfortunate thing is that most individual investors -
including those with lots of experience - overlook this unique
strategy. That is why I arranged for this opportunity to show
Income & Prosperity
readers how to earn extra income by using covered calls on blue
If you were unable to join me for the webinar last week, I
encourage you to watch a rebroadcast right now.
Just click here: Covered Calls 101 - With MSFT
income investor should be using covered calls to earn 2x - 3x the
investment income from blue chip stocks. If you're like
most of my readers, you may think that covered calls are either
boring or complicated. My goal is to prove to you that this
strategy could mean all the difference.
But I know that your time is valuable, and you may now be able
to spend one hour watching my presentation. So what I'm
going to do today is answer some of the most common questions
that might help you understand this opportunity.
I recently retired, and I'm a conservative investor. Do
you think covered calls are an appropriate strategy for someone
Covered calls are the only option strategy available to use in
retirement accounts. I think that alone speaks volumes as to how
inherently conservative covered calls are as an investment
strategy. I tell investors all the time, particularly retirees
that there is no better way to consistently bring in income on a
residual basis. Moreover, the strategy actually decreases
volatility within a portfolio. It's a win-win for all investors,
especially those who seek reliable, consistent income.
I would love to earn an 8 - 10% yield from my blue chip
stocks. Is this really possible?
Yes! We started
High Yield Trader
as a way to help our readers earn more income. At minimum, our
goal is to double the dividend in every shareholder-friendly,
blue-chip company we add to the portfolio. Since the service
started roughly six months ago, we've been able to double,
triple, even quintuple the dividends on half of the holdings
within the portfolio. So yes, it is possible. And most important,
is that it's possible without taking huge risks.
How do I know which strike price to use for selling
This is probably the most frequently asked question among
investors new to covered calls. That's understandable because
there is a huge range of choices available in an options chain.
For someone new to covered calls it can be overwhelming.
Below is the options chain for
Microsoft (Nasdaq: MSFT)
, one the stocks we discussed in the webinar and one of our
High Yield Trader
As I'm writing this, MSFT is trading for $35.30.
So basically, the further out of the money the call options
sold, the more room there is for the stock to go upwards, but the
lower the premium received from the call options
Let me explain using the options chain below.
Right away, you will notice difference in color between the
) and out-of-the-money (OTM) options. Beige is ITM and white is
Basically, the closer you sell an option to the at-the-money
strike -- in our case the 35 calls are considered at-the-money --
the less room there is for the stock to go upwards but the higher
the premium received from the call options themselves.
The reason is because there is a greater chance for stock to
close above the strike at expiration. Obviously, the further away
we are able to sell our call strike the more margin for error and
the greater the chance of success on the call sold.
Yes, there is no free lunch in
and options trading is all about trade-offs between profitability
and risk. As such, your outlook on the performance of the stock
is pivotal in deciding which strike price works best.
If you expect the stock to go up significantly, you would write
further out-of-the-money call options, while if you expect the
stock to still go up only very slightly or not at all, you might
decide to write just slightly out-of-the-money call options or
even at-the-money call options. A popular method used in options
trading is to sell the call options on the price at which you
expect the stock to peak.
High Yield Trader
we take the guessing out of the equation by selecting
probabilities calls that are higher than 70% (as seen in the far
left column). By using probabilities, we would sell the December
37 calls (77.23%) or the December 38 calls (86.77%).
Also, you have to consider transaction costs on the options
you wish to sell. If they're only worth a nickel or a dime, they
are probably not worth selling because of the transaction costs,
so you have to go out longer in those cases to get enough premium
to cover your transaction costs.
Which expiration cycle do I use to sell covered
Unless you have a strong reason to do otherwise, the practice
in options trading for covered calls is to sell the calls 1-2
months out as they expire fastest, putting time
decay in your favor. Remember, we are selling our calls to
speculators so the best-case scenario is to have our calls expire
worthless. This means that will receive the max profit on the
Again, I hope you have a chance to watch our latest webinar.
It's a great primer to get you started using covered calls on
some of the most shareholder-friendly, blue-chip companies
available to investors. In fact, MSFT and INTC are two of our
As always, if you have any further questions please do not
hesitate to email me at