Hi,
In my opinion, options are one of the best investment vehicles. This is because of control. An option contract can be used to cash flow a stock much like a real estate property, it can return capital gains, or it can offer insurance. They also perform while the markets go up, down, or sideways. With options, it doesn't matter what the stocks are going to do, it only matters that we are positioned in a way to profit according to our chosen strategy.
To cash flow from a stock, my favorite strategy is to sell covered calls. This is selling a promise to the markets that we will sell 100 shares of stock we own, if the price of that stock reaches a certain price before and at the expiration.
Three things can happen when selling a covered call.
One, the stock price rises above the strike price. Now we must sell with capped gains at that sale price. We still keep the premium we collected to sell the call at the beginning. We make money because aside from the premium, we hopefully chose a strike price higher than what we bought the stock for.
Two, the stock price goes sideways. We keep the premium and the stock.
Three, the stock price goes down. We keep the premium and the stock.
Have you been thinking about buying a real estate property, managing the tenants, maintaining the property, and collecting rent? There are many that will get a loan for 80k, put 20k down, and buy a 100k condo that cash flows 100 dollars a month.
I understand that there are many benefits to real estate like equity, leverage, tax benefits, and owning a tangible asset, but that same 20k could be used to buy 700 shares of Delta Airlines. That 700 shares would return $602 dollars a month right now in the current market. Not a bad rent to collect each month. (You also get to collect the dividend each quarter.) And you also own part of a company with their profits. (If that stock price returns to what it traded at pre corona virus, those monthly gains and dividend returns will also increase.)
If this is all new and foreign to you, I suggest you get started paper trading using ThinkorSwim. (You can see how I use it here.) Our financial future is at stake. We all need to be ready to be able to profit no matter what the markets do if we are going to be able to survive what is to come.
"Cash flow is king" - GC
Tanner
p.s. follow me on twitter
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