Dividends and Covered Calls
Two ways which an investor can make some passive income off of their stock are through covered calls and dividends. Who can say no to getting some extra cash flow from a stock that they already own.
So what are they? Well let’s look at dividends first. When a corperation has a great dividend stock they pay their shareholders a portion of their profits. By keeping a dividend stock an investor can profit month after month from their share of the dividends.
If you have enough money then you may be able to make a nice income by investing into dividends.
Dividends can help investors make extra money from a stock that they own, however there are other ways to make money. An Investor can also make money by writing covered call. When an investor writes covered calls they sell another investor the right to buy their stock at a specific strike price on or before a specific date.
The advantage to this is that it can pay pretty well. An investor can recieve a pretty nice premium each month simply by selling covered calls.
But unlike dividends you do take on risk when you recieve calls. If the stock makes a big move in the near future that investor would be forced to sell their stock and miss out on a big chunk of the move. So basically you take on some risk of missing a profit in the future for some money now.
It is up to the individual investor to decide if it is right for them, but in general it can be a pretty powerful technique. Selling covered calls and investing into high dividend stocks both allow you to make some extra cash flow from your investment. If the stock also increases in price during that time then so much the better.
