In a low-interest rate world, income-seekers have to get creative. Plopping your dough in a savings account to score 3% annual interest is a thing of the past. Some say it may be a thing of the future, but what about those seeking income now?
Many investors find their way into the stock market with an eye toward cash flow. They gravitate toward dividend-paying stocks like utilities, telecoms and real estate investment trusts. But what if you’re a tech stock lover or have your eyes on a lovely little security that lacks a dividend? Are your chances for cash flow blown to smithereens with such investments?
Fortunately not. All you have to do is embrace a beautiful little option strategy known as the covered call. It essentially allows you to get paid for a promise. Someone will pay you (typically anywhere from 1% to 3% a month) for your willingness to sell your stock at an agreed upon price. If your stock doesn’t rise to the agreed upon price, you get to keep your shares and the initial money you were paid. If the stock does rise to the agreed upon price, you’ll have to part with your shares, but you capture a tidy profit.
Check out these covered call ideas on a trio of popular tech stocks that don’t pay dividends.