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Last Edition’s Featured Comment from as10675:
Creating Retirement Income with as10675:
“My retirement generating assets are in three account types brokerage Taxable 37.7%, Roth IRA 31.6% and Traditional IRA 20.7%. There are three major way to get income from largest to smallest contributions to that income. 1. Realized Capital Gains. 2. Selling PUTS and CALLS for the Option premium income. 3. Qualified and Ordinary dividends.
1. The greatest way to obtain retirement income is through harvesting long term or short term capital gains. Many seem to want to argue this out of concern for selling shares in a down market, or that a share can be sold only one time, then they will be gone and you will be broke, or they can’t wait for gains to appear. Fact is the last 16 years have been great years for realizing capital gains for income. The greatest road to wealth and income have been through capital gains.2. Selling CALLS and PUTS for option premium income. More income can be made by selling cash secured PUTS and Covered CALLS then by collecting dividends. Options are sold in 100 share increments as 1 option contract. Options are harder to understand than harvesting a price pop (pop corn). Money is made with price volatility and probability of occurrence within a time frame. My selling PUTS and selling CALLS is like being an insurance company, I collect premium payments paid to me.
I sell cash secured PUTS.That means that I write a contract (sell) a PUT to “buy” 100 shares of stock that I want at the exact price that I want and within the timeframe that I decide (establish). The time frame can be the same day or extend to over a year away. The contract expires on the predetermined date. The buyer of my contract pays me a cash premium for the right to sell me that 100 shares at the agreed upon price prior to contract expiration or not, their choice within the timeframe (they pay for that right). I keep the premium paid to me if they exercise the PUT option to sell the 100 shares of stock to me or not.
I sell Covered CALLS.That means that I write a contract (sell) a CALL to “sell” 100 shares of stock that currently own at the exact price that I want and within the timeframe that I decide (establish). The time frame can be the same day or extend to over a year away. The contract expires on the predetermined date. The buyer of my CALL contract pays me a cash premium for the right to buy from me that 100 shares at the agreed upon price prior to contract expiration or not, their choice within the timeframe (they pay for that right). I keep the premium paid to me if they exercise the option to buy the 100 shares from me or not.
These two paragraphs don’t prepare an investor to sell cash secured PUTS and Covered CALLS. Premiums for selling options are larger than dividend income and payments are immediate.Dividend Income
There are two types of dividends Qualified and Ordinary. Dividends produce the least amount of income for me. Since I sell cash secured PUTS I have to retain the agreed upon price of the 100 shares in cash. That dollar amount for September probably averaged about $250K. That $250K was collecting ordinary dividends at 4%+ annualized as well as all the PUTS options premiums at the same time. The CALL option contracts are still collecting the dividends for the underlying stocks. And of course any stock that paid a dividend in September is included in the income.
I am not goosing-up any source of income. I am very conservative and optimize taxes.”
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