One of the great benefits of steady, blue-chip stocks that you plan on holding in perpetuity is that you can generate extra income from naked puts and covered calls on these stocks at relatively low risk.
If you haven’t purchased these stocks yet, but want them for your portfolio, you can sell naked puts against them, pocket the premium and if it gets put to you, you own it. If it doesn’t, you can still buy it or repeat the naked put sell. Or if you do hold them, you can sell covered calls, generate income from the premium, and if it gets called away, you can buy it back. The idea is you intend to hold these forever, and try to juice a little extra income from them.
Following up on this week’s article on “3 Stocks to Buy and Hold Forever,” I thought I’d tie in an options article to these same stocks.