Double Your Retirement Income: Three Strategires For A Successful Retirement A comprehensive guide to retirement encourages workers at all levels to save for their In many areas he even helps the average small investor find ways of.
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I will discuss in complete detail about this trade and cover some important topics that are relevant to the trade. Exxon Mobil XOM needs no introduction. Arguably the most well known of the gas and oil blue chip companies, Exxon currently pays a great and reliable and increasing dividend of 3. Exxon and has been beaten down since the summer of along with most other oil and gas companies. I use Exxon as my go to gas station with its SpeedPass and all. Getting income from XOM is like Exxon paying me back for buying their gas.
At least it feels that way to me. XOM data by YCharts. I keep an eye on that list and wait for opportunities to happen. Since I spend most of my retirement having fun and enjoying life, I only keep one eye on my list and it's only at certain times - like when a holding is at its ex-dividend date or when I see in the financial news that a stock has taken a dive. Of course, when I was working, I use to keep four eyes on my stock list almost all the time, but those days are over.
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When a great company is hitting its 52 week low for no major reason, I consider it to be on sale. The stock might not be at its ultimate bottom, but I'm not looking for a bottom. My thinking at that time: The company is down because of the decline in the price of oil.
Exxon was not the only company in the oil and gas sector that had fallen - most oil and gas companies were down including Chevron CVX another wonderful stock that I purchased around the same time for the exact same reasons - they had similar dismal articles in the media.
The stock was clearly in a downtrend and it could go even lower and it did , but I felt like I was getting a great deal at this level. If I could buy the Exxon before the next ex-dividend date in August, I would be getting a quality blue chip stock selling at or near its 52 week low.
I could then sell covered calls months out to collect a nice option premium. Finally, I would get the benefit of collecting the August dividend by buying the stock before the ex-dividend date. The covered call is important to me in three important ways. First is the amount of income collected from the sale of the option contract. Third, is the option strike price.
The problem with the September contract is that it would be another days to expiration. The sooner the covered call options expire, the sooner I could rewrite new covered calls and collect new option premium. The option premium is worth more than the dividend payment plus I get the income faster and with less time to wait. The alternatives were not as appealing. If the stock had any decent movement to the upside, the stock would be close to option assignment levels rather quickly.
So I would also have to track the stock price movements closer than I want to. Tracking my portfolios is the last thing I want to do. After I make a purchase and sell the option, I leave it alone and move on. After all, in retirement, the last thing I want to do is microwatch my portfolio. While my primary goal is collecting income, I do not mind collecting capital gains.
More discussion on option assignment will come in the next article. Along with the premium, I ended up collecting 4 dividend payments for income. The covered call options expired worthless. The trade, which took place in my IRA account, would not have been possible without having the cash available in my portfolio. All trade analysis was done before any trades were done.
This is common practice for me for any purchases in my portolios. As an income investor using the double income investing strategy, whenever I consider purchasing a stock and selling the covered call, there are several factors to think about beforehand. Buying a stock on sale is preferred, but not mandatory. While capital gains are always nice, I do not expect it to happen and it is not my goal as an income investor.
However, I fully expect to receive income from my stocks. I do not expect capital gains because I do not know where a stock price is going to go in the future.
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