written by reader Covered calls on dividend stocks for long term cash flow

By xiexgp@gmail.com, October 31, 2013

I had an opportunity (for about 2 minutes) to talk with Jon Najarian about options and portfolio growth. He told me that for his daughter’s college fund he owns MO, sells calls monthly, and receives a dividend for a steady income. He undoubtedly owns a boatload more shares than I could but do any Irregulars use this strategy? Would you be willing to share your thoughts, results? Thanks!

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bwd1up
bwd1up
6 years ago

Hello, I am interested as well. I just finished watching another Stansberry pitch teasing a secret algorithm and newsletter Retirement Trader. The claim is he will send you the exact strategy and positions to take on a regular basis, and futher claims he is 129 of 129 consecutive picks. Naked Puts?? Has this been discussed in previous issues here – i’m a week old irregular. The Retirement Trader is pricey – the offer is 3K and at a 25% discount. Any information would be appreciated!

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sonetirot
sonetirot
6 years ago
Reply to  bwd1up

Sell Naked Put could be making money for you every month. I agree on that. I had been doing that every months. However stock selection is the most important and pick enough that it will not make you go to the poor house. Just enough to make money little by little. My rule is to pick the safest stock that you understand and know it could not go down 10 or 20% over night with bad earning report. Selling put could make bankrupt if you are not careful when the whole market collapse (temporary) like 2008 and 9/11 etc.. Even the safest stock crash for a while but you would get margin call and account closed. That is the extreme case. During side way and bull market. Selling put would add a lot income. I do not need Porter Stanberry to tell me and I won’t pay $3000 for that. My stocks that I own including selling put such as AXP, BA, BDX, BRK/B, CBI, CHK, COST, DNKN, GS, LNG, MCO, MGM, NFG, NOV, OXY, V, WAG. About 1/2 of above stocks I do have share and kept it as long term. Other I do not have share, If I really wants to have share, I would kept selling put with strike price close to stock price to get share sooner or later I would have shares put to me I I would like to have. If not, I am gladly to collect money every month. Once I have shares I still selling put of those stock but with strike price much lower than market price so It would have small chance of having stock put to me but still want to collect premium. So stocks selection to sell Put is very important. I do not want to sell put high flying stock such as high P/E and high beta. Premium might be very high but a lot of risk when you rule is pick the safest stock and collecting premium. My total position is high enough that I could make about $5000-$10,000 every month when those put expire. I will use that cash to acquire more stock via stock being PUT to me. Presently have about 10 stocks about $95,000 worth ($10,000 +/-)total. I try to kept diversify and with $75,000 cash and ($16,000) in short put expire in Nov,Dec. With all still out of money put chance are that about 1/2 of those put would expire worthless. Then I will have more margin power. If you do not know how to select stocks, You could try Dailywealth trader from Porter Stanburry. I think they charge $89 per month so you could learn how they pick the stocks (just for tuition that is OK). I did subscribe for a while until I know how they worked and picked the stock. I may get lazy to pick good stocks myself and may want to take easy. Problem that I could see is when they issue the pick, more people would try to do the same then you would get less premium selling put.
BTW: I am qualify for total portfolio margin since I am experience trader. Thinkorswim give higher margin power. To qualify you need to take their test to make sure you understand the risk and how to get out when thing get rough (ie.. market crash when diversify of stocks won’t matter. Safe stock got sold off). Another requirement is that you have more than $100,000 in the account. Make sure you have staying power during that time. It will come however non experience put seller would got crush.

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harvey manhal
harvey manhal
6 years ago

Don
t let covered calls go deep in money. Roll them before too deep in money

harvey manhal
harvey manhal
6 years ago
Reply to  harvey manhal

I have been selling puts and am very happy.
Say stock is $60.25.
Sell maybe 58 strike—premium goes into your cash account.
Could sell 59 or 60 strike and get more cash immediately.
If stock goes down to say 57 and you do not want to buy stock, roll the 58 strike to next month or maybe 57 strike–all depends on the new premium
Been doing weeklies options on DDD and FB.

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