Investing and trading options can seem like opposing and incompatible strategies. But using options may be one of your smartest strategies for increasing retirement income.
Investing during your retirement years is a little different than investing to prepare for them. When you were young and just starting out, you could take a lot of risks. If your investments didn’t quite work out, you had plenty of time to get back on track.
When you were in your prime earning years, you probably started thinking ahead, mixing stocks and bonds with some alternative investments for a little spice. Maybe some gold, or a limited partnership, or even an angel investment with a friend.
But retirement is rarely a time to speculate. For most people, sticking with reliable dividend stocks has been a successful strategy for safely growing a retirement portfolio. After all, your retirement fund is there to provide you with income to live the life you want, and what you want is stability and income.
That means investors avoid options, finding them too risky or volatile for retirement. But that doesn’t have to be the case. What many investors new to options don’t immediately realize is that there are dozens of different strategies that use options, many of them designed to reduce the overall risk in your portfolio. These are not speculative “jackpot” types of trading, but rather understated strategies designed to help you achieve your goals.
Money morningOptions trading specialist Tom Gentile has a strategy that uses options that can turn the stocks you already own into income payers.
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The strategy is called “covered call writing.” That’s a fancy way of saying that you sell options on stocks that you already own.
And selling calls is as easy as clicking a button. There is no complicated math or special brokerage lingo to memorize.
Here’s exactly how to do this and start adding income to your retirement portfolio. today…
How to sell calls for retirement income
Selling a covered call is simple. All you need to do is own at least 100 shares of a stock (option contracts are for 100 shares) and then go to your brokerage account and look for a call option on that stock with a strike price and an expiration date. expiration. comfortable with, then sell it.
When you sell a call option, you collect the premium or cost of that option immediately. No matter what happens next, that premium is yours. And if you do it over and over again, it can become a good source of income.
But there are three things that can happen when you sell a call option that you should be aware of.
First, if the share price stays the same for the life of the purchase contract, then your premium will be pocketed. Congratulations, you just received a payment to hold a share in your portfolio!
Second, the price of the stock may go down. If the stock falls, you may not be very happy, but stocks go up and down all the time, so expect some fluctuation in your portfolio anyway. But this time, he collected cash on the option he sold. And don’t forget that you still own the stocks that are likely to pay you a dividend and have the potential to rise again. After all, that’s why you bought it in the first place.
Third, stocks can go up in price and make the call you sold actionable. This is where you should pay attention. If the shares go up, the new option owner may decide to withdraw his shares from you. That just means that they can buy your shares at the price specified in the contract. You get that price, which will be a profit since you started, and you can still keep the premium. You can then take that cash to buy shares of the stock you own if it falls or buy a new share and start the process over.
It’s not bad at all. The only real risk here is if the stocks you own skyrocket and you lose those gains. But you likely have stable companies in your retirement portfolio, and this strategy will give you a solid income on those stocks.
Just remember, every time you sell a call option and your shares are not canceled, you can deposit your earnings and sell a new covered call option to do it again. And you can continue to do so, every few weeks, if you want.
If a low-risk income stream doesn’t fit into a retirement plan, what does?
For more information on how Tom uses options to help his subscribers, be sure to check out this …
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This is an opportunity you don’t want to miss.
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