Benzinga and Yahoo Finance LLC may earn commission or revenue on some items through the links below.
Generating a few thousand dollars a month from the stock market sounds like the kind of promise usually followed by a sales pitch. But one investor says he's been doing exactly that with a strategy that many everyday investors have heard of but never seriously explored.
The investor shared screenshots in a recent Reddit post showing an average monthly profit of about $2,525 over the past six months from selling covered calls and cash-secured puts. While he was quick to acknowledge the risks, he argued that options income is often misunderstood.
What If Your Budget Adjusted To Your Life—Instead Of The Other Way Around?
Earn While You Scroll: The Deloitte-Ranked #1 Software Company Growing 32,481% Is Opening Its $0.52/Share Round to Investors
"I think a lot of people still find the stock market intimidating, especially when options are involved, but once you understand the basics, these strategies are not as complex as they might seem," he wrote. "There are also plenty of tutorials and resources available now, so getting started is much easier than it used to be."
The strategy he uses is commonly known as the "wheel." It starts by selling cash-secured puts, which allows investors to collect option premiums while potentially buying a stock at a lower price. If shares are assigned, the next step is selling covered calls against those shares to generate additional income.
In other words, the investor gets paid for agreeing to potentially buy a stock he wants to own and then gets paid again for agreeing to potentially sell it at a higher price later.
The process can then repeat over and over.
According to screenshots shared in the post, the investor completed 138 trades with a 74% win rate and generated more than $15,000 in net profit over six months. Much of the activity centered on D-Wave Quantum (NYSE:QBTS), a volatile quantum-computing stock that produced larger option premiums because of its price swings.
Trending: The Future Of Work May Look Very Different From Today's Office. This Startup Is Building Toward That Vision.
The investor emphasized that his objective isn't to beat the market.
"My focus is on generating consistent, realized income rather than chasing paper gains," he wrote.
That distinction sparked one of the biggest debates in the discussion. Several commenters pointed out that simply buying and holding successful growth stocks often produces better long-term returns, particularly during strong bull markets.
Source: Yahoo Finance Top News — This article was automatically imported from the source. Read full article at original source →
