6 Dividend Stocks EXCELLENT for Selling Covered Calls [Video]

In this video we are talking about how to generate insane cash flow from dividend stocks and opportunities to 3X your cash flow by selling covered calls AND collecting the dividend.

JOIN THE PATREON COMMUNITY!
➡ https://www.patreon.com/AverageJoeInvestor
WANT ACCESS TO ALL OF MY SPREADSHEETS I USE ON THE CHANNEL ALONG WITH THE MONTHLY DIVIDEND STOCK SPREADSHEET AND INSTANT AWARENESS OF CHANGES TO MY PORTFOLIO? JOIN THE PATREON COMMUNITY!

➡ https://www.patreon.com/AverageJoeInvestor
You can also Work with Joe 1 ON 1!

🔴 Partner With Me – [email protected]
Want to increase your option selling knowledge and get started!

Need a GREAT Dividend Tracker for your portfolio? Here is what I use and it is EXCELLENT:
The Dividend Tracker: https://thedividendtracker.com/?ref=l0M8x9

This communication/content is for informational purposes only and is not intended as personalized investment advice, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This communication should not be relied upon for purposes of transacting in securities or other investment vehicles.

Selling covered calls on dividend stocks is a strategy that can enhance income from an investment portfolio. Here’s how it works and what to consider:

What is a Covered Call?
Definition: A covered call involves owning the underlying stock (in this case, a dividend-paying stock) and selling call options against that stock.
Mechanics:
You own 100 shares of a stock.
You sell one call option contract for these 100 shares. Each option contract typically represents 100 shares.

Benefits of Selling Covered Calls on Dividend Stocks:
Additional Income: Apart from the dividends, you receive the premium from selling the call options.
Dividend Income: If the stock remains below the strike price at expiration or if the option isn’t exercised early, you keep the dividends.
Potential Capital Gains: If the stock is called away (purchased by the call buyer due to exercising the option), you might still realize a profit if the strike price is above your purchase price.
Volatility Reduction: The premium received can reduce the effective cost basis of your stock, providing some cushion against price drops.

Strategy Considerations:
Strike Price:
Out-of-the-Money (OTM): Selling options with a strike price above the current stock price. If the stock doesn’t reach this price, you keep the stock, the premium, and the dividend.
At-the-Money (ATM) or In-the-Money (ITM): These can yield higher premiums but come with a higher risk of the stock being called away.
Expiration Date:
Options with longer expiration dates generally yield higher premiums due to greater time value.
Dividend Interaction:
Early Assignment Risk: If the dividend is substantial, there’s a risk of early assignment as the call buyer might exercise the option to capture the dividend. This is more likely if the option is in-the-money and the dividend exceeds the remaining time value of the option.
Taxes:
Selling covered calls can alter the tax treatment of dividends and capital gains. If held for over a year, dividends might qualify for lower tax rates, but selling calls could affect this holding period.
Risks:
Loss of Upside: If the stock price rises significantly above the strike price, your upside is capped at the strike price, meaning you might miss out on significant stock price appreciation.
Stock Called Away: You might lose the stock if it’s called away, missing out on future dividends unless you buy the stock back.

Practical Steps:
Select Your Stock: Choose a dividend stock you’re comfortable with potentially selling or holding long-term.
Choose the Call Options: Decide on the strike price and expiration. Typically, you might look at options expiring post the ex-dividend date to ensure you receive the dividend.
Sell the Call: Execute the sale of the call option through your brokerage account.
Monitor and Manage:
If the stock price nears or exceeds the strike price, you might decide whether to buy back the option to close the position or let it get exercised.
If the option expires worthless, you keep the premium and the stock.

Conclusion
Selling covered calls on dividend stocks can be an effective way to generate extra income, but it requires careful selection of stocks, understanding of option mechanics, and awareness of tax implications. Always consider both the potential rewards and risks, and possibly consult with a financial advisor or use educational resources to ensure this strategy aligns with your investment goals and risk tolerance.