How to Cash Flow With Stocks
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Personally, I love income investing strategies that can generate stable income for me. What I love even more is income investing strategies that can produce income on a monthly basis. Most of you already know that I quit my job and kissed goodbye to my monthly paycheck a couple of years ago.
So, I had to create new income streams to cover my monthly living expenses and pay all my bills. Investing was such an income stream. Income investing refer to a method of options income strategies for monthly cash flow that aims to generate cash flow from your investments such as stocks, bonds and real estate. Investing in dividend stocks is a very popular investing strategy. The underlying company usually has a long history of paying out consistent dividends. Depending on the dividend policy of the underlying companies, these companies generally pay out dividends once or twice a year.
The underlying company can decide when and how much to pay. When you buy bonds, you are essentially making a loan to the bond issuer.
Depending on the terms of the bonds issued, you might get an interest payment semiannually or annually. But, the minimum investment amount for bonds is generally quite large. Having said that, there is another way for you to invest in bonds with less capital.
Rental property is another popular income investing strategy. You buy a rental property, lease it out and collect rental every month. As we are looking for decent monthly investment income, buying a rental property using a mortgage loan does not really help us achieve our goal. You might think that your cash flow would double, triple, quadruple or n-tuple if you could find more deals like this. But, the risk you are taking with multiple rental properties will increase substantially in a rising interest rate environment.
When your mortgage payment exceeds your rental income, your positive cash flow would turn into negative cash flow. And we are not yet even talking about the possibility that the value of the properties could go down.
So, rental income is nice if you have the cash to pay for the rental property in full. Real estate investment trust is a good alternative to rental property. Many REITs are publicly listed on exchanged where you can buy and sell easily, just like stocks. Here are some advantages for investing in REITs for income: Second, it gives you exposure to different types of commercial real estate such as shopping malls, hospitals and offices.
I will explain this later on. We call this agreed price Strike price. Premium is the amount of money that the options buyer has to pay to purchase the option.
Premium is usually a small percentage of the stock price. To many people, they feel that trading options is very risky and difficult. But, did you know that Warren Buffett, a conservative investor, sold PUT options to boost his investment returns? Options are just a tool that he uses to buy the stock he wants at the price he wants. Bus, taxi and bicycle are just vehicles that can help us get to where you want to go.
Similarly, options are just a tool that we use to help us buy stocks at our target buy price and sell stocks at our target sell price.
Stock investing by itself is risky, just like all the other types of investments out there. Similarly, it could also stay at an elevated level for a long period of time. As no one options income strategies for monthly cash flow predict where the price will go in the future, what matters most is how you manage your risk. But, the premiums you earned from selling PUT options can be used to reduce your cost price.
The only downside is that you will not enjoy the potential upside if the stock price suddenly shoots up substantially within a short period of time. But, the probability of such things happening is generally quite low. For our strategy, we incorporate the principles of value investing in selecting the stocks we want to sell options on.
We all know that value investing is all about buying good options income strategies for monthly cash flow for less than its intrinsic value. Next, we want to make sure that the stock price has a low possibility of going down or going down by much in the near term, from a technical analysis point of view.
Then, we will start selling PUT options in the short term at a strike price that is near the market price. Options will expire worthless if the stock price stays above the strike price at expiration date. This is the scenario that we like the most. When options expire worthless, we get to keep the premiums for free. If the stock price still stays near and above the strike price, we can continue to sell PUT options to get paid month after month. But, if the stock price goes up by a lot, we will move options income strategies for monthly cash flow to our next target to sell PUT options on.
Options will be exercised if the stock price goes below the strike price at expiration date. What you do next is to start selling CALL options income strategies for monthly cash flow on your stock holdings to help yourself get out of your position at a profit or at break-even price.
By repeating this process over and over again, we should be able to create a steady pay cheque for ourselves month after month safely and simply. Gladice, thank you for sharing. I have no experience with options but would like to try this options income strategies for monthly cash flow.
Is there an example with numbers on your blog for better understanding? Your email address will not be published. Learn More Get Started Today. Additional menu Personally, I love income investing strategies that options income strategies for monthly cash flow generate stable income for me. Most of my bills need to be paid every month. Cable bill… Most of you already know that I quit my job and kissed goodbye to my monthly paycheck a couple of years ago.
Ideally, it could generate consistent monthly income. What Is Income Investing? Dividend Stocks Investing in dividend stocks is a very popular investing strategy. Bonds When you buy bonds, you are essentially making a loan to the bond issuer.
Rental Property Rental property is another popular income investing strategy. How it works is very simple. Third, you get dividend payouts on a quarterly basis. I will explain this later on So first, what are options? Are Options Very Risky? Yes, he also uses options. Let me give you an analogy. For example, we want to go from point A to point B. There are a lot of ways we can do it. We can take bus. We can ride our bicycle.
We can take a taxi. When you buy a stock, the stock price can go up or down. How Cashflow Investing Strategy Works For our strategy, we incorporate the principles of value investing in selecting the stocks we want to sell options on. Now, there are two things that might happen: So, what happens when options income strategies for monthly cash flow options get exercised? You have to buy the stocks at the strike price. Comments Gladice, thank you for sharing. Leave a Reply Cancel reply Your email address will not be published.
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