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We were able to increase our monthly cash flow in September (2021) by over $240 from options income. We earned this income from selling call and put options (mostly puts).
Buying and selling options contracts is a strategy we are using to increase our monthly cash flow. We turn around then and use the 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 September 2021
During the month of September, we earned an extra $244.55 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) Puts – $195.24
- Cincinnati Financial (CINF) Calls – $49.31
Total Options Income September 2021 – $244.55
It is worth pointing out … we have 1 call option contract for CINF sold in September still open (at the time of this writing) that has not expired yet. There is a very high probability this call will expire worthless in October.
We also were assigned 100 shares of Palantir Technologies (PLTR) for one of the put options sold during September. Starting in October, we will begin selling covered call options against these shares to continue generating monthly cash flow.
2021 Options Income Totals
The month of September was an average income month for selling options compared to the rest of 2021.
So far in 2021, we have added $2,362.25 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
- September – $244.55
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 and August 2021 options income reports for reference.
2021 TOTAL Options Income – $2,362.25
This total comes out to a monthly average of $262.47 … 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 September 2021
So far in 2021 we have generated an extra $2,362.25 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 the only stocks that we had to buy (to date) were 200 shares of PLTR. This was a result of 2 separate put option contracts being assigned. We turned around and sold covered call options against these shares to continue generate more cash flow.
Almost all of the extra cash we have earned (just over $2,300+) has been invested back into our dividend income portfolio. This will help to accelerate our other passive income stream.
For example, investing $2,300 in a 3% dividend yielding stock would add another $70 of recurring annual income for us! And not to mention … the annual compounding growth that will 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. At this point in the year, we may not be able to reach that goal but I think we will get close.
Do you sell options to generate cash flow? What do your results look like?
