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We were able to increase our monthly cash flow in August (2021) by over $150 from options income. We earned this income from selling call and put options.
Buying and selling options contracts is a strategy we are using to increase our monthly cash flow. Then we will use this extra cash to buy stocks that will increase our dividend income stream.
Today I would like to share our latest monthly options income report.
Just like we detail our monthly dividend income … the plan is to do the same for our options income and provide details on how we earn this cash.
Below you will find a quick breakdown of our strategy. Then I will cover where we earned that income.
Generating Income from Selling Options
There are two main strategies we are using to generate income from trading options – selling cash secured puts and selling covered calls.
Our goal is to sell out of the money puts and calls … and then (hopefully) let the option contract expire worthless.
In some cases, we roll the contract out further to avoid it being exercised … as our main objective (for now) is to increase monthly cash flow.
We have recently adjusted our criteria and look to only sell puts and calls that will expire between 30 to 45 days after the transaction date. This is more of a guideline than a hard rule.
Let me breakdown each of the two strategies a little bit further …
1 – Selling Cash Secured Puts
One way we now generate monthly income is by selling cash secured put options.
Here is a quick summary of our strategy –
- must have enough cash in our brokerage account to buy 100 shares of the stock at the strike price
- only sell puts on a stock that we wouldn’t mind holding long term
- sell out of the money puts
- let the puts expire worthless (if possible)
- sell options that expire between 30 to 45 days
These again are just some high level criteria we look for when selling cash secured puts.
Just a few additional details about selling cash secured puts …
The term “cash secured” means we have enough cash in our account to purchase 100 shares of the stock at the strike price if needed.
Any put option that is considered “out of the money” means that the strike price is below the current share price of the stock.
2 – Selling Covered Calls
The second strategy we are using to generate extra monthly cash from options is selling covered calls.
Here is a quick breakdown of what we look for in selling these options contracts –
- own at least 100 shares of a stock (1 option contract = 100 shares of stock)
- sell contracts that are out of the money (the more the better)
- sell covered calls that expire between 30 to 45 days
- let the call option expire worthless (if possible)
- sell covered calls on stocks that I am okay with having to sell
As I said earlier … these are just some high level guidelines for now that may be tweaked in the future to increase our cash flow.
I would also like to point out … every call contract we sell is “covered” … meaning we own at least 100 shares of the stock.
And … a call is considered “out of the money” when the strike price is above the current share price of the stock.
Recently we have had more success from selling covered calls for income compared to cash secured puts.
Options Income August 2021
During the month of August, we earned an extra $154.69 from selling options.
Most of these funds were invested into our dividend income portfolio. These monthly investments will help to grow our passive income stream of dividends.
Here is a quick breakdown of how we generated this options income –
- Palantir Technologies (PLTR) Calls – $68.90
- Palantir Technologies (PLTR) Puts – $37.26
- AT&T (T) Calls – $34.62
- Cisco Systems (CSCO) Calls – $13.91
Total Options Income August 2021 – $154.69
It is worth pointing out … we have 4 options contracts sold in August still open (at the time of this writing) that have not expired or been exercised yet. There is another holdover option sold back in July as well that has not expired or been exercised.
I’d also like to mention that in many cases we sold multiple option contracts during the month for a particular stock. For example, we ended up selling 2 different covered calls on our AT&T (T) shares during August.
Sometimes these contracts expire worthless and sometimes we roll (buy it back and sell a new one) the option contracts. The totals noted above are the sum of all the contracts per security.
2021 Options Income Totals
The month of August was a much slower income month for selling options compared to July (2021). However … I believe it was still a positive month and this is an income stream we can continue to grow.
So far in 2021, we have added $2,117.70 of extra income by selling call and put options.
Here is a monthly breakdown of our options income –
- January – $233.17
- February – $130.87
- March – $386.89
- April – $471.19
- May – $152.77
- June – $148.44
- July – $439.68
- August – $154.69
For more details on our first half of the year results, check out our June 2021 option income summary. And here is our July 2021 options income report for reference.
2021 TOTAL Options Income – $2,117.70
This total comes out to a monthly average of $264.71 … or the equivalent of my monthly car payment + our Netflix subscription.
For my wife and I … we are using the income earned from selling options to invest back into our dividend income portfolio. Although … using it to pay our monthly bills sounds nice too.
Summary – Options Income August 2021
So far in 2021 we have generated an extra $2,117.70 of cash from selling options. This includes both cash secured puts and covered calls.
I consider the time I spend (which isn’t a ton) on this effort as a side hustle. And yes … this money will likely be taxed depending on our overall tax obligation this year.
It is also important to remember there are risks involved with selling options, which I believe we have minimized as much as possible.
The good news is that we haven’t had to sell any stocks from our portfolio … yet. And we haven’t had to buy any stocks (other than 100 shares of PLTR) for our portfolio that were not planned for.
Note – I am expecting to have to sell our 100 shares of PLTR in September … which is okay. Be sure to check out our September options income report for updates.
Almost all of the extra cash we have earned (just over $2,000) has been invested back into our dividend income portfolio. This will help to accelerate our other passive income stream.
For example, investing $2,000 in a 3% dividend yielding stock would add another $60 of recurring annual income for us! And not to mention … the annual compounding growth that come in future years.
The plan for the remainder of the year is to continue to grow this income stream by minimizing risks as much as possible. We will continue to dump all of the cash we earn back into our dividend income portfolio.
The goal for now is to generate an extra $3,500 in cash by selling options in 2021. I think we are right on track at this point … maybe a little behind but we will get there.
Do you sell options to generate cash flow? What do your results look like?
