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Strategies For Income Investors
By John | July 29, 2010
Investing into stock for some extra income has been a very popular strategy for quite a while. If you have some extra money saved up or if you plan on investing your money there are a few different things that you can do to get some income from the stock market.
1. Buy Dividend Stocks
The first thing that you can do is to invest into dividend paying stocks. A dividend stock is simply a stock that pays you small amounts of money at a consistent rate simply for holding onto them. They can be a nice little bonus to traditional stocks and if you invest enough money it can actually add up.
The main advantage is that you won’t risk anything by recieving the dividends.
2. Covered Calls
Another strategy to make money off of a stock that you own is called covered call writing. When you sell covered calls on stocks that you already own what you are doing is selling someone else the right to buy the stock from you at a specific price on or before a specific date in the future.
For instance if you own a stock that is trading at $48 and you sell the $50 call option on it you make some money up front. However if that stock should go above $50 before the option expires you would get called out and have to sell your stock at $50.
Now that might not be so bad, if you bought the stock at $48 then you would profit by selling it at $50 and you would profit by the call that you sold as well. There is just one downside and this is that you may miss a big profit. If the stock goes up to say $60 then you would miss a big profit and have to sell it at $50 because you sold the call earlier.
On the other hand if the stock stays below $50 by the time the option comes due it will expire worthless and you will get to keep the stock and the profits from the option. If you wish you could then sell another call option on the same stock to make even more money. So, you have to decide for yourself if it is worth it. But as far as I am concerned it is.
Topics: Investing |
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