Dividend Stocks + Covered Calls = EXPLOSIVE CASH FLOW
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- เผยแพร่เมื่อ 5 ต.ค. 2024
- In this video we are talking about dividend stocks with explosive call option premium and the amazing results we can achieve by combining compounding dividend income with covered call option premium.
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Shhhhh 🤫 u exposed my roth ira strategy. Started with 200 shares of aeo then used the dividends and covered calls premium to get abr. Then once i got 100 shares of that i used the divs and premiums to get 100 shares of cswc. Rinse and repeat to get gsbd. Now im working on vici. My roth is compounding beautifully.
AWESOME TRAVIS! Your secret is safe with me. ;-) THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
Travis, I'd like to ask you how this is going 8 months later, I'm 20 trying to stack my roth ira, and any independent experiences to learn from is helpful.
I like gsbd but no covered calls
Thanks Joe, this is a great great video, I have been looking for something similar where dividend stocks can pay more then 1% in premiums on .20 30DTE. I came up with INTC, MO, JNJ, ABBV etc but I had no idea about WHR and others in this video, so thanks for bringing this to my attention.
The questions I have are: (Maybe next video 🙂)
1. should I sell PUTS first or should I start with selling Covered Call?
2. When should you sell calls red day, green day or any day as a repeat cycle?
3. What other dividend stocks give 1-2% premiums on .20 Delta with 30DTE?
4. How did you find these dividend stocks that have good premiums?
Thank you for the continued quality content, there is no better time to be a dividend growth investor than during these times with where our economic climate currently is.. I think investor should remain forward thinking and with a long-term mindset to invest into high quality dividend stocks now and simply wait while collecting on dividends until the share prices return back to pre-recession fear levels. Ultimately, this will require the FED to raise rates and inflation coming down.. Time takes time, but the return will come with such a simple strategy!
Well Said. THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
You have shared all the secrets )) Perfect strategy!
THANK YOU so much for that feedback! I really appreciate it. =) THANK YOU for watching and for leaving your $0.02 in the comments!
On small option premiums like AEO, you really need to pay attention to the in/out cost you'll pay in commission. $1.30 total (even up to $2.00 on vanguard) to sell-open / buy-close would reduce the amount you keep by over 7% on $18 worth of premium.
Great video, PRU is a another good one. I also like to sell as secured puts if I want to start a new position in a company, you get paid and it will lower your break even price, just another way to create income. Oh also you can use both pits and calls an do a wheel strategy
Thank you, I am going to be adding these to my watchlist. This is a strategy I am really looking forward to implementing.
I've definitely been considering this method, but haven't settled on a stock I want to do covered calls on yet. It's a good idea! I think any stock that you have that has good liquidity and volume of trades would work on this.
One thing to be aware of... if you sell covered calls on stocks that pay dividends, they could be called or "assigned" before expiration if they are in they money. Usually a stock won't be assigned until the Friday expiration after the market closes. But if a stock goes ex-dividend, and if the math works for the option holder, the shares could be called away before expiration. And the other guy also gets the dividend.
It is easy to roll up or roll back the call if the covered call is in danger of being assigned.
Simply don’t sell the options when they are in the month of ex-div date. Still might get assigned but it won’t be because of the dividend payout.
This is good feedback! Yes I usually will not sell the option within 1-2 weeks of the ex-div date to play it safe. 😎 THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
@@veloenthusiast I agree! It just takes a lot of situational awareness.
@@tedwilliams7032 Go Red Sox
How about EPD, ET, GAIN, and PARA? All are dividend stocks with good option chain.
Maybe a dumb question but why not just buy 100 shares schd and sell covered calls on that? Not enough juice? Thank you love the content.
Average Joe, really like your channel ! Good information provided. I'm a dividend investor that has dabbled with covered calls for about three years. In your example it looks like a no brainer, but in real life it isn't always that simple. My problem is that I have researched and scoured the internet for some actual long term information or scientific study that can illustrate that this strategy works over time. Do you have any such information that would back up this strategy ? Thanks
Totally agree with selling calls on dividend stocks. Very few dividend gurus talk about this great strategy and very few investors will even do it, but it's their loss. Thanks.
How do you stay ahead when the value goes down, even with dividends, they lower the price of the stock, to give you the difference of dividends. That sounds even to me, although in this current downturn, in still losing because the value goes down! What am I missing?
I've been using eTrade to buy ETFs and have considered getting into covered calls. eTrade doesn't show me the Delta like your screen did. Where can I get that info and what brokerage are you using?
Nice idea ! Kudos....
THANKS JOHN! THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
Great content as always..but isnt this what divo/xylg also do? Would you prefer an etf that does this strategy for you rather than doing it yourself.
Thanks Joe. I have 132 shares of IBM and am always looking for good premium to sell. Cheers!
AWESOME! THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
My broker's options chain doesn't show the delta. where can you find it?
How do you protect the portfolio from one crash?
What is the highest delta you would pick for an aggressive covered call strategy? Assuming you are OK being assigned now and then.
A .20 seems low on most premiums.
GREAT QUESTION LIAM! You could definitely go with a higher delta and get more income. I am lower at .20 mostly because most of my positions are below their cost basis. I am usually more comfortable in the range of .25 - .30. THANK YOU for watching Liam and for leaving your $0.02 in the comments! 😎👍🏻
I have two types of call stocks. One are calls on "core stocks", which I don't want to be called away - I use a 10 delta on those. On stocks I don't mind being called away, I use a 20 to 30 delta...
👍 very detailed explanation, added to my perspective bout dividend stocks together with covered calls
11 months later your video made a difference to me, tq
Do you recommend any particular Brokerage Service? One that would require you to jump through extra hoops to be able to sell call options? Thank you
Robinhood is probably the easiest but I personally use Fidelity. Robinhood also has a pretty good interface. THANK YOU for watching L G and for leaving your $0.02 in the comments! 😎👍🏻
Doesnt the stock price drop after receiving the dividends?
Thank you Joe. This is another great video on selling covered call for income.
THANK YOU for the feedback! =)
Just found your channel… good stuff sir! Do you buy Leaps?
GOOD QUESTION! I do not buy LEAPS because I want to capture the dividends. THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
Joe awesome content. Curious if I do this under my Roth IRA in M1 will it trigger a tax event? If I have 100 stocks and they end up selling, won’t that cause a tax scenario?
Excellent information Joe. I have been selling covered offer options on SCHD. I think four of these will be assigned soon. I’m thinking I may go to individual stocks that I pay dividends and have covered call income. I like the way you have laid this out and analyzed it. I wish you would do a similar. Analysis of 3M. Why isn’t 3M suitable for cover calls
Hi Gilbert! Thanks for weighing in. It just comes down to MMM not having as much option premium as other options. THANK YOU for watching Gilbert and for leaving your $0.02 in the comments! 😎👍🏻
Video request! covered call etfs on margin. Purchase 200k worth of qyld with 100k and draw a 24% dividend on invested cash? Maybe play out some historical examples.
Super risky in my opinion. Downturns COULD RESULT in forced sales at the worst times. THANK YOU for watching MSlocum669 and for leaving your $0.02 in the comments! 😎👍🏻
@@AverageJoeInvestor Yes but consider different levels of margin and using dividends to pay down margin. There could be some magic butter zone for retiring early with less. It is at least worth a conversation IMO.
45 DTE sell target give or take. Manage or close at 21 DTE. Most theta. This is the way.
How often does someone buy your covered calls? Is there like a statical ratio? Is there some time range or price range that sells more often?
Great stuff and very clearly presented. Any drawbacks to owning 500 shares of Eagle Creek and writing 5 covered calls (to get the highest virtual dividend overall)?
Another very informative video. I'm doing covered calls with 6 stocks in my IRA. I'm "flying closer to the sun" than you but I'm getting assigned more often too. Though in a down market such as this one I'm not as worried about having to re-buy the stock as I just might be able to pick it up for less money than I got for it when assigned.
Just roll over the options, less taxable events
He’s in an IRA so not as big of a concern BUT to your point it IS something to be aware of if you are doing it in a brokerage account. THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
@@AverageJoeInvestor Thanks for replying Joe. I was puzzled at his comment and was going to suggest that perhaps he meant to reply to someone else's comments.
Another great video. Do you reinvest the option premium into the same stock?
GREAT QUESTION! I personally do not. I roll the option premium EITHER into my high dividend stock portfolio OR whichever dividend stock I am trying to increase my position which is currently TROW. THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
Can you list stocks that you are currently selling covered calls on ?
I know that you talked about them in some of your videos but I can’t remember in which one.
I have open covered calls right now on BBY, MO, CL, AFL, CMCSA, GILD, INTC, SBUX, SCHD, VZ and WBA. THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
@@AverageJoeInvestor - Thank You
Any reason why you’re not rolling your options when they get in the money ?
Hello Joe - what service do you use to identify the Call Premiums you can get for your stocks? Is that your Brokerage Acct.?
Yes, I am getting the option chain from Fidelity's website. =)
Thanks Joe, really nice presentation, well done. Looking forward to future ones!! Best of trading!!
You should call out two things for better information (1) Premiums are great because of volatility but will collapse less once volatility goes down (2) as tock drops, at the money premium will also keep getting lower
Hey Joe, fantastic content! What happens to the qualified dividends while selling covered calls on the stock? They won't be qualified anymore right if we sell options on it. Thank you!
What’s your thoughts on Tasty Trade’s 45DTE covered call strategy? 45DTE/30 Delta, close at 21 days or roll
It's an interesting strategy. I personally like the greater time decay with 30DTE and I usually go 30 DELTA but many positions are currently below my cost basis so I am trying to retain the stock as much as possible. THANK YOU for watching Shane and for leaving your $0.02 in the comments! 😎👍🏻
Thanks Joe. Great content! What website are you using for the options quotes that includes the delta?
HI RICHARD! THANK YOU for the feedback. I am using the Fidelity website in the video. THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
I have a robo advisor doing my Roth, but it mostly goes into bonds and that makes me a little agitated. Would it better if I took control and just put the funds into a total stock market index fund? Also just subscribed, thanks for the valuable info!
Don’t use an advisor! You lose so much money over time. Just invest in index funds
@@Someth1ngLight thanks
Roth's are perfect for high yielding stocks plus selling calls on them. NO tax !!!
Love the video. If you have the available funds its much easier and better to run covered calls on index etf’s.
I agree with you 100% though you get smaller dividends if you get stuck with a position WAY BELOW your cost basis. THANK YOU for watching Nick and for leaving your $0.02 in the comments! 😎👍🏻
Joe can you do a video on how to do options step by step? Thanks!
Very good video, great job. Been looking forward to some results since you started using the strategy. And, maybe some more on the strategy. When to keep to exp, do you buy back or close the positions early?
Hey Ted, I personally will usually hold to expiration unless I can get 90-95% of the premium if I am buying back early. THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
This is great! This video definitely ages well!! Well done!
Subscribed!
The problem with these is when the share price falls out the bottom and you can't reasonably recover even with the premiums. It happens more than I would like. For example, American Eagle, Whirlpool, and Best Buy have been on a steep statistical share price graph downturn for over a year so I wouldn't necessarily call them quality in this regard at this point.
These days, you have to accept share price loss - the market rules. But selling calls on falling stocks can reduce or partially mitigate share price loss....
This is so true... You need stocks with low beta that don't move much. Some are even lower than the actual index, although you probably get less return but I think it is worth it.
Great Channel, great content
Thank you for all the research and time.
But, quite complicated. Not everyone have the same knowledge. Might be beneficial to demonstrate that in actual brokerage account.
Joe, it looks to my novice eye like COWZ is really separating itself over the last 2 years from the other popular ETFs (VOO, VTI, VYM, SCHD, NOBL, etc.). I've started a position it myself. What are your thoughts? Would love to see you add COWZ to your comparison analyses in the future!
Also, sent you an email a few days ago. Hope you got it.
I sell CC on SPY on a weekly basis. I am counting on selling OTM CC and use the proceeds to purchase SCHD at depressed prices.
Awesome! Yes, I will be talking about selling covered calls on ETF’s in the next week or so. 😎 THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
Have you considered doing this with SPX? I saw somewhere that they aren't assigned, but cash settled. Also, are you selling cash secured puts to purchase SPY first before you start writing calls?
Puts are something I do not understand to well. I know that they are the opposite of calls, however, for me to get involved in puts, I have to understand how the premium is generated and above all, the risks. For now, developing a competency in CC is what is most important to me now.
Do you need to own 100 shares of a security for the put transaction. I ask because I do not know.
@@vitawater4259 You need to have enough cash available to purchase 100 shares of the stock at the strike price you choose, in case of assignment. If you are assigned the stock, then you can turn around and sell covered calls. Doing this cycle of puts and calls is what is referred to as the "Options Wheel."
Sounds great but in Canada we have to pay about $10 for the first contract and $1 for each additional contract to sell or buy calls so for example on the American eagle half of the covered call premium would be eaten out by the option fees.
Ouch, that's tough Brock. THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
I am considering trying it with some of the higher premium stocks though. Thanks for the good info
I am from EU so also some cool US brokers are not available here. But IBKR helps me out. Look it up.
I use IBKR Canada and it's less than $1 per contract with no ticket charge
What do you do if the stock drops and selling calls will risk losing the stock below cost ?
As long as you don't sell calls below your cost basis this won't happen. If you buy the stock and it takes an immediate dive you'll have to hold onto it until it recovers, which hopefully it eventually will.
Can you do a review for Ticker: O or the Realty Income Corp
Very informative thank you. Another stock Hanesbrandes HBI looks like an interesting stock to sell calls against at todays pricing.
So, $7000 and after 30 days, strike price is higher then mine, do I lose $7000? I don't understand anything.
So with CC. Do I want the price to stay below my strike price?
Yes
Yes, in an ideal world you get to keep your stock as well as the option premium. This occurs as long as the stock does not reach the strike price. THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
@@AverageJoeInvestor thank you. You’re the best
I’m new to this so is Divo a good stock to do call options
Hi David, in my opinion DIVO is great for Cash Flow NOW or in your high yield dividend portfolio you will be living on soon. It is not a great choice for selling call options. THANK YOU for watching David and for leaving your $0.02 in the comments! 😎👍🏻
I like doing this to my dividend stocks, however Canadian options are bunk. low volume and big bid/ask spreads
Bummer… THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
Great video! I love your explanation
Glad it was helpful!
Super corny at the end but I love the videos. Thanks for sharing 😊
Selling options on a dividend stock removes the qualified dividend tax advantage. I'd be interested to see how that plays out over time.
I will take over 20% selling covered calls over any dividend
Well so YES the option premium is not going to be tax advantages BUT the dividends I’ll still be qualified. Tax treatment is certainly a consideration but not the primary factor in whether a strategy is ideal. THANK YOU for watching Cory and for leaving your $0.02 in the comments! 😎👍🏻
Great video! I’m new to options trading and so I’m watching as many videos on the topic. You talk about potentially getting assigned when you sell a call. But couldn’t you just turn around and use the money from the sale to buy back those 100 shares?
You don’t get assigned when you sell calls, the stocks get taken away from you if you allow assignment. You must own it to sell covered calls. Stocks are only assigned to you when it expires in the money when you sell Puts, or buy calls not when you sell calls. I know its confusing
Thanks.
Im wondering how much you need to have invested before you see any significant dividend returns to reinvest and compound. Talking about schd etf. 0.60 is kinda high too isn't it?
That is .06% not .6% so it is very low.
This is so complicated for me. Let me ask a simple question. If I established the exact portfolio that he layed out, and my total investment across all of them is 150K, what would my annual cash flow be?
Charles, I have copied Joe's portfolio and have around 148K currently invested. I have made a little over $3,600 in 6 months for an averaging of $600.00 in dividends each month. Good luck sir...
BTW, I do not do options, and I reinvest all dividends.
Average joe, can you do weekly covered calls on these stocks? How about weekly options on hood? I know it doesn't have dividend
You can sell covered calls on HOOD weekly.
@@steve99912 will that be a cheap stock for small accounts?
I do weekly CCs. Make sure you have the time to babysit them if you go that route. Things move a lot quicker then monthly.
You definitely can BUT to Erin’s point you do have to babysit it more because the strike prices will be closer to the money. THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
@@erinsmith824 which stocks do you use c calls on ?
UNCLE JOE- Important for people to know not to play covered call through Earnings : )
Maybe. But implied vol is high so the premiums are higher and it could work out.
This is good feedback Dave. At the very least there needs to be awareness of when earnings is so we are watching the option during that timeframe. THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
Awesome !!!
Thxxx brother Joe :)
Sam 🎵✌🏻
You bet Sam! THANK YOU for watching and for leaving your $0.02 in the comments! =)
@@AverageJoeInvestor This is so complicated for me. Let me ask a simple question. If I established the exact portfolio that he layed out, and my total investment across all of them is 150K, what would my annual cash flow be?
I love this video and your content? Anyone on hear doing this in their Roth? I feel like this would be a cheat code
Can you share that google sheet / excel?
Nice job Joe!
THANK YOU for the feedback! 😎👍🏻
Well done
THANK YOU so much for that feedback George! I really appreciate it. =) THANK YOU for watching and for leaving your $0.02 in the comments!
Great video
THANK YOU for the feedback! I appreciate it! 😎👍🏻
Let’s goooooooo Joe 🤙🏾🤙🏾
HAHA, THANK YOU for watching Chris and for leaving your $0.02 in the comments! 😎👍🏻
In this market 30 days out is way too much imo
That’s the plan. Just don’t have 100 shares yet lol
Too bad I'm not investing on a platform that allows me to do options ... but that's okay. I'm still not sure I want to do the options thing anyway.
No worries Tyler. THANK YOU for watching and for leaving your $0.02 in the comments! 😎👍🏻
@@AverageJoeInvestor I suppose I'll just have to expand my platforms.
You want to do even better? Sell puts on the same stocks and match the premium you get for the calls. The worse that can happen is you purchase 100 more shares of dividend paying stock that you already own and over time collect more dividends and sell more calls.
Those are called "strangles", and that's what I'm doing...
My advice to new investors: Buy good companies stocks and hold them as long as they are good companies. Just do this and ignore the forecasts and market views which are at best entertaining but completely useless
what i think you need is a Financial Adviser, who can help you get in and out of any stock you buy at any time and you'd sure be in Profit
I call bulls**t on this. You CAN get additional money flow with covered calls, however; the premiums you show for these stocks at 20 delta is extremely inflated. You're lucky if you can get a 1/10th of what you show. In fact, these are near the money premiums (40 to 45 delta) that you talk about. Quit misleading people.
thank you for this video, very useful. Looking at the table it is obvious that covered call strategy deliver more income than a dividend. Do you know how to scan for high yield return from required cash, I am on thinkorswim.