Passive Income on Stocks You Own
Most retail stock investors (that’s us!) believe they have to buy stocks and wait for them to increase in price to get a return. This, of course, is one way to make a profit on stocks. But it isn’t the only way.
I recently wrote about how to Buy Stocks at a Discount building in a certain amount of profit as you buy the shares.
But, what if you already own the shares? Can you earn a monthly income from your shares? The answer is − absolutely!
This type of trading is known as Covered Call (CC) stock options. Depending on your broker, you may see it identified as Covered Call Writing (CCW).
As I mentioned in my previous article, buying stock options are a way of buying insurance to reduce your risk from stock market losses. But selling that insurance gives you the ability to earn passive income on stocks you own.
If you purchased stock with Robinhood or Tastyworks and you have at least 100 shares you can sell a CC. Covered Calls gives the buyer the right, but not the obligation, to “call away” (they buy) your shares. So, the downside of this income stream is the buyer can buy your shares at a lower price. A Put option is the opposite where you get…
