Thursday, August 24, 2017

Using Options To Boost Dividend Income

Last year I decided to add options trading to complement DivGro's strategy of investing in dividend growth stocks.

My options trading activity is focused on generating extra income. I sell covered calls on some of my DivGro positions and I sell put options on stocks I wouldn't mind adding to my DivGro portfolio.

I don't buy options and I consider myself a learner options trader.

In this article, I discuss my approach to using options to boost dividend income. After 15 months of executing this strategy, I'm happy to provide some insights and to share results.

Please head over to Seeking Alpha to read this article.

In the article, I explain how I sell covered calls and secured puts to generate extra income on top of the dividend income that DivGro produces.

I share a few of case study of each type of options trade, pointing out some benefits and drawbacks of options trading as it relates to dividend growth investing.

Finally, I provide a complete summary of all the options trades I've executed since starting in June 2016. The summary is organized by stock, so it provides clues to which dividend growth stocks are suitable for options trading.


Thank you for reading! Please let me know what you think of this strategy. Do you sell covered calls and cash-secured (or naked) puts for income? 

2 comments :

  1. Hi FerdiS,
    I like the strategy, and I enjoyed your article. To supplement my dividend income, I started trading options about 4-5 months ago - selling covered calls and cash-secured puts, just as you mention. I only sell 1 or 2 single-contract options a month at this point, as I dip my toes in the water. So far, it's been going well. I hope to start writing about it sometime soon. In the meantime, I'll keep checking in at DivGro, as I'm sure you have insights that should prove helpful to me.

    ReplyDelete
    Replies
    1. Thanks for commenting, Engineering Dividends!

      I think it is important to start slow and make sure you gain experience, expertise and confidence at a good pace. In time, you'll be able to increase your income and start reaping the benefits.

      One of the reasons I like dividend growth investing (versus trading) is that it I don't feel I have to constantly watch the markets. Selling options is somewhat like that -- I "know" the possible outcomes and as long as I'm patient, the income will roll in. Buying options (which I've tried years ago), is the opposite. You have to watch the markets all the time! I'm glad I don't do that anymore!

      Delete

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