When You Learn to Take the Breadcrumbs from the Table, You Can Eat Every Week
Everyone dreams of hitting the jackpot—winning the lottery, scoring big in the stock market, or striking it rich overnight. But here's a question: if you found a dollar on the ground every single week, would you pass it up because it wasn't five or ten dollars? Probably not. That dollar adds up over time, and so do the small, consistent gains in investing. This is where cash-secured puts and covered calls come into play. Think of them as the breadcrumbs on the table—small, steady profits that can feed you consistently if you know how to pick them up.
The Power of Small, Consistent Gains
In the world of investing, everyone wants to double their money overnight. But let's be honest—that's gambling, not investing. Instead, smart investors focus on strategies that bring in steady, reliable income over time. Enter cash-secured puts and covered calls, two options strategies that can quietly put cash in your pocket week after week.
Cash-Secured Puts: Getting Paid to Wait
Imagine there's a stock you'd love to own, but only if it drops to a certain price. Instead of waiting around, you can sell a cash-secured put option. This means you're agreeing to buy the stock at your chosen price if it drops—and you get paid for making that promise. That payment? It's called a premium, and it's yours to keep, whether the stock drops or not.
Here's how it works:
If the stock doesn't drop to that price, you keep the premium and do it all over again. If it does, congrats! You get the stock at a discount. Either way, you're making money.
Covered Calls: Getting Paid to Sell (If You Have To)
Now, let's say you already own a stock. You can sell a covered call option, which means you're agreeing to sell your stock at a higher price in the future. In return, you get paid a premium upfront. Again, that's money in your pocket right now.
Here's the game plan:
If the stock doesn't rise to that price, you keep your shares and the premium. If it does, you sell the stock at a profit, plus you still keep the premium. Either way, you're stacking those breadcrumbs.
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Why Deep Out-of-the-Money?
You might wonder, "Why go deep out-of-the-money?" Simple. It reduces the risk of the stock hitting your strike price, and while the premium might be smaller, it's more consistent. Remember, we're collecting breadcrumbs—small, steady gains that add up over time.
The Weekly Paycheck
Here's where it gets fun. Options contracts typically expire every Friday. This means you can set up these trades every single week. Imagine collecting $50, $100, or even $200 in premiums every week. That's like finding money on the ground every time you take a walk.
Let's do some quick math:
Suddenly, those breadcrumbs are starting to look like a whole loaf of bread!
Patience Over Greed
Sure, these premiums aren't going to make you a millionaire overnight, but they can create a steady income stream. The key is patience. Most people overlook small gains because they seem insignificant. But in the long run, consistent income beats inconsistent windfalls.
Final Thoughts: Stop Ignoring the Breadcrumbs
Everyone wants to win the big prize, but most people ignore the small, consistent wins that are right in front of them. Cash-secured puts and covered calls are like those breadcrumbs—easy to overlook but powerful when collected consistently.
So, next time you're tempted to chase the next big stock or crypto moonshot, ask yourself: "Am I passing up dollars every week because they're not big enough?"
Start picking up those breadcrumbs. Because if you learn to take the breadcrumbs from the table, you can eat every week.
Bon appétit!