How to Invest for Income in the Stock Market

In this video, I'm going to show you how to generate consistent income on a daily or weekly or monthly basis from the stock market. And here are 10 traits from an account of mine recently that each generated somewhere between $5 and a few hundred dollars in income. And in this video, I'm going to break down everything from A to Z and go through the pros and cons and real life examples. I have nothing to sell you. All I ask is that you hit that subscribe button. And before we get into the video, I want to tell you about today's sponsor, Minara. So this video is all about investing over the long term and minimizing risk while still generating consistent income. Whether in the stock market or crypto, which we've covered in other videos on the channel, most retail traders like you and myself are not able to do this in large part due to a lack of information. 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Please notify me when Bitcoin breaks above a certain price. Or I have $100,000 in EIDL funds. How should I maximize returns and allocate? If you want to take control of this powerful new wave of AI and simplify your investing, just click the link below right now and join the waitlist. There are limited early access slots available, so make sure to claim your spot again right now. And that said, let's get into the video. So first, this is an options based strategy. And before you run away again, we want to take the lowest risk possible strategy to generate income like so. So first, I want to explain what options are and I want to do so in a more intuitive sense. So I think of options like a coupon, right? Let's say there's a pizza shop and they sell pizzas for $10 a piece, but they give you a coupon to buy that pizza for $6. And you can do that in the next two months. What you essentially have is an option on that pizza. You have a piece of paper or a contract that lets you buy that pizza under the market price for just $6. And if the pizza shop raises the price of that pizza to let's say $14, you're really happy because you just saved $8 instead of $4. But if they drop the retail price of the pizza to just $5 and your coupon can let you buy it at $6, then it expires, quote unquote, worthless. It's not worth anything because if you used it, you more than you could pay by just walking into the pizza shop and buying a pizza. If you understand that analogy, you understand all the fundamental components of options. The strike price is the price of the coupon. The expiration date is how long it lasts. And the amount it's worth depends on what it lets you buy or sell something for relative to the retail price or what you could just buy the underlying asset for. And there are two fundamental kinds of options. There are calls and puts. And if you buy a call option, you're betting that the stock price goes up. A call option is like a coupon that lets you buy a stock at a certain price by a certain date in the future. So let's say again, the pizza is worth $10. And I think that the pizza shop is going to raise the price of it to $15. Well, I might buy a call option that says, okay, I'm allowed to buy the pizza for $12. And it might be super cheap right now because the pizza is just worth $10. But maybe I know that it's going to, or I'm betting that the price is going to increase. So I buy that call option. In that call option, let's say I pay $2 for it. I pay $2 and I get the coupon that says, hey, you can buy a pizza for $12. And then I wait two months and the pizza is now selling for $15. Well, I paid $2. I go into the pizza shop. I buy my pizza for $12. 12 plus 2 is 14. So my profit, so to speak, is $1. I saved $1 on that trade by betting that the price of the pizza increased. And so call options increase in value as the price of the underlying asset increases, and they expire worthless if the retail price of the asset is under what's called the strike price or the coupon value of that call option. Now, a put option, the other side of this, is kind of the opposite of a call option since we buy a put option if we think a stock is going to go down. It's a little more difficult to work with the pizza shop analogy, but just hang with me here. Let's imagine that we have a pizza. We own one pizza of our own, and the retail price is at that $15 mark. Well, let's say we think that's going to decrease, and we want to sell our pizza back to the pizza shop to go sell to a customer. Well, we can pay, let's say, $2 for a put option or a coupon, so to speak, that gives us the right for the next two months to sell a pizza to the pizza shop for a price of $12. Now, this may sound silly because why would we sell the pizza to the pizza shop for $12 when it's worth $15? But let's say it's been a month, we turn around, and that pizza's retail price is $7. Well, now imagine how valuable our put option is, right? Because we can walk into the pizza shop with this pizza that they're selling for $7, and they have to buy it from us for $12. And so there's a $5 spread there, we paid $2 for this option or this contract, 5 minus 2 is $3 in profit, so to speak, or money saved from that trade. And that's exactly what a put option is in real life with stocks. It gives you the right to sell an asset at a predetermined price by some point in the future. And so if you are allowed to sell an asset for this price, maybe it starts up here, but it ends here, then this difference is the spread, the width of the trade is the amount of money or profit that you're going to make. Now, all of that, those are the basics, they're the building parts, but that's not actually the strategy that we're using to generate income. Calls and puts are very risky. I don't recommend that you go after watching this video and buy some calls and puts. You can lose a lot of money doing it, and there's often unlimited loss involved, which I won't get into in this video. But what we just discussed is what's called a long call or a long put, which means we're buying a call or we're buying a put. And this is where it gets a little conceptually difficult. So I'll do my best, but you can also watch other videos when you want to, or if you want to reinforce this concept. Calls and puts typically, and a lot of people buying these options require big moves to make a lot of money, right? You need a stock to go up a lot or go down a lot. But what if you provide the liquidity to the market? What if you do the opposite of buying calls and puts or long calls and long puts? And you're like the California people who were selling the shovels to the gold miners. You're not digging for gold, you're selling them the shovels and making a little bit of money every time you sell a shovel. And that's what are called short calls or short puts. These are also called naked puts, for example. And when I say that you're supplying liquidity to the market, that's exactly how it works. So if you buy a call option, for example, then you get a hundred shares at the lower price if the option expires in what's called in the money or under the retail price. But where do those hundred shares come from? They come from someone else who put a contract out there that said, I'm willing to give you a hundred shares if this happens. And for what are called naked puts or short puts, then the people supplying those contracts are saying, I am willing to give cash to buy a hundred shares from you at a higher price than the price of the stock if the stock price falls below that price. So I know that can sound a little bit gnarly, but again, it's really just the exact opposite side of the same trade. If you buy a call option, you think the price is going to go up a lot and you get shares if it does at a certain price and you pay for them. On the other side, you can take that money for the shares if that event happens. So the strategy in this video is selling naked puts or short puts. So how does this generate income? Well, since you're taking on some kind of risk for this trade, you get paid what's called a premium just to offer the contract on the market, which means you get paid to just offer that collateral or basically to be the other side of that trade. Going back to the pizza analogy, let's say the price of it is $15 and you don't think it's going to go up or down a lot. And then you could go to a customer of that shop and say, you give me $1 now. And if the price of the pizza shop goes over $20, then I'll go and buy a pizza for you and sell it to you for just $18. So you gave me a dollar, you get the pizza for $18, you make a dollar in profit if the pizza jumps from its price over to $20. Well, then the question is, how likely is that to happen? And this is like I said, where it's all about risk management and call and put or long call and put traders often bet and need big moves to turn a profit. On the other side of it, we can just make a little bit of money here and there. We can make $5, $20, $50, a few hundred dollars. But if we do that with options that expire this week, so every Monday we buy some options, we sell them on Friday or two weeks out, a month out, then we can generate income or the premium on these calls and puts every single week. You could even do this every single day. Now, there's a thing called the delta, and that's kind of like your win rate where it's how risky this trade is. So if you have a very, very low delta, you're really likely to win. You have a very high probability of not having to fulfill the obligation of the contract. So in the pizza analogy of not having to buy the person the pizza for $18. So I'll give you a more material example. Let's say Apple stock price is trading at $100 per share. Well, you could put a contract out there that says, if Apple stock price falls below $80 next week, I will buy the shares from you at that $80 mark. But you have to pay me $100 for me to take on that risk. Now, Apple stock price is super stable. It's not really very often going to fall 20-plus percent in a single week. But if it did, you would buy at the higher price of $80. And if the stock price is $77, then you lose, say, $3 there per share. But you get the $100 in cash. And so if you do that 52 times over the course of a year, and you do that once per week, and Apple never falls 20% in a week, which is a pretty good bet, then you get $100 a week. Now, that is radically oversimplifying it and also making the return sound a lot better than they actually are. That is just for sake of understanding, like this whole video. So next, I want to give you three real trade examples from this past week. So first, AMD is a stock I like. I've been buying into it for six months now. And so this is one key of selling puts. You really want to do it with stocks that you are long-term bullish on, or you think over the long term are going to go up. Because that way, if you do have to buy the shares, then you're fine, because you think the stock's going to go up over time. That's the case in AMD. And let's go to the price of AMD. Right now, AMD is trading at $180. So stock price, $180. Now, what I did is I sold a put for $157. So $180, way up here. $157 is way down here. And it expires on August 15th, and I placed this trade on that Monday. So what that means is, at any time before August 15th, if the price of AMD falls under $157, then I would have to pay, or for the person who was on the other side of this trade, I would have to pay $157.50 per share for 100 shares, because 100 shares is one contract, so to speak, from them. So if the I pay them an extra $7.50 per share, times 100 is $750 that I now am in the red, because I own shares over the market price of them. But the thing is, I don't think AMD is going to do that. AMD is pretty stable. It's going up. It's been going up a lot recently, and I want to own it, so it's fine if I get called on it. So I got paid $26.96 for this contract. So that's $27 in income this week by taking on that trade. And since there's 100 shares per contract, my collateral for that is $157.50 times 100, or about $16,000. Here's another trade with Celsius. I've also owned Celsius for a long time. I'm bullish on them long term, and I really like the drinks. And with this trade, I initiated it on August 1st, and I did so for a put that expired on the 15th of August. So that's now two weeks. But the stock price of Celsius was only $45, I think, maybe, at that time. So that's about $4,000 in collateral, instead of $16,000 required for the larger trade with AMD. I only bought one contract, and my credit for this, or the premium, or the amount of money I got paid, was just about $28. So that's $28 in two weeks, and my collateral for that is the $3,500. And that's because the strike price was $35. So the share price, $45. Strike price, or the price for the contract, is $35. So if this price of $45 becomes $30, then I lose money. If it falls under $35, then I'm not doing so well. I'm losing money. But Celsius, again, I want to hold it for the long term, for the next, say, six months or a few years. And so it's also pretty stable. For it to fall from $45 to $35 in two weeks is like a 15%, 20% downward movement. I don't think that's going to happen, and it didn't happen. And so I made my $28 over the course of two weeks. And just as an example of the kind of returns there, $28 may not sound like a lot, but 28 times 24 for your annual return is $672. Now we're on the calculator app here. Now $672 with $3,500 in collateral is nearly 20% a year, which beats the S&P, which beats most markets. And that would be assuming that you didn't lose a single time. But if I'm bullish on the stock, and I assume I am going to lose here and there if it's a volatile stock, then that's a pretty good return I can make. And I can compound that because I'm getting paid out so frequently. And here's a third example. So this I initiated on August 11th. Expiration date is August 15th. Now the stock price of Coreviva at that time was like $120 or so dollars, I think. Let me just check that chart so I'm not speaking incorrectly. Yeah, the stock price was about $135. But people were betting on it crashing because the lockup period on the stock was expiring, and it did crash. But I didn't think it was going to crash all the way down to $80 for a number of reasons that I can get into in another video. So I got paid $25 for those four days to take on this contract. So if the $135 stock falls under $80, then I have to go and pay $80 for 100 shares. And currently, today is August 15th. So the day this expires, Coreviva did crash a lot, but only to currently $98, which is still 25 plus percent away from my $80. So I'm totally fine. And I made another $25 on that trade with about $8,000 of collateral. That said, I want to wrap up this video with three pros and cons. So the pros is consistent income. You can do this and make money every day, every week, every month, or as regularly as you want. Two, it's consistent even in down markets. Even when the markets are red, you can still make good consistent income doing this because you just are betting on the amount it goes down. And if you do safe trades, which is what I highly prefer, at least personally, then you're just betting that stocks that you are bullish on don't crash, say, 30% or 20% or 15% or 5% depends on the stock over the course of a certain period of time. And there's a lot of work that can go into figuring out what those strike prices should be. But generally, just keep in mind that this can do really well when the market is down, and that's a big advantage. And number three, there's a lot of flexibility and control here. You have a lot of options, and you can make a lot of decisions really fast. So you can do what are rolling out these positions. You can trade them up, trade them down, and you can do this regularly. Again, you can initiate contracts on a day-by-day or week-by-week or month-by-month basis. So how about the cons? First, there's big losses and small wins for most of the time depending on how risky your strategy is. In fact, there's unlimited loss because the stock price could go to zero. Theoretically, you could lose all of your money. Now, in practice, that never really happens. But what does happen, an example going off the trades that we looked at, I'm making $25, $30 per trade there. If a trade really goes south on me, like something insane happens, the stock goes down by 50%, now I'm in the hole a few thousand dollars. And to make back a few thousand dollars off $25 per trade just isn't feasible. So it's all about risk management and sizing your bets so that you make more money, you cut your losses. And that's number one. Number two is active management. If you don't want to think about stocks or your investments, this is not for you. This is only if you want to actually put effort and thought on a daily, on a weekly basis into these kinds of trades. And number three, you need capital to do this. If you have a $1,000, $100 account, you're not going to be able to do this effectively, both because of the risk involved and because of the collateral that you need. For those trades we looked at, that was $30, $40,000 in collateral that I need to have to take on those trades and earn that premium. If the stock prices are lower, you can still find great trades with, say, a few thousand dollars. But if you're talking like under $500 or under $1,000 or under really $2,000 or $3,000, it's really difficult to find good trades that are not really, really risky. So overall, there's a lot of risk there. You want to know what you're doing. You want to do your research. It's not a sure bet, but what it is, is an approach to making income consistently in the market, which may or may not be a fit for you depending on the conditions of the stock market and what you think is going to happen in a macro sense. So again, this is not financial advice. I'm not telling you to go and do this, but I do want you to be aware of it so that you maybe can consider it or do more research on it in the future if you feel that it's a fit for you. That said, that is the video. Thank you all for watching, and I'll see you in the next one. Cheers.