Building Passive Income

I really believe that all investors and business people should look for ways to generate an extra, independent, separate source of income. The problem is that most people are so busy already that they need a way to build this income in a non-busy, passive way. Now comes Writing Covered Calls. It is  way of using two aspects of the stock market and combining them so you get assets producing income.

Most investments do not generate income from an outside source. Can we find a way—like Rental Real Estate—to use the stock market to spin-off real spendable cash? Can we use this method to make extra money for our retirement—whether it’s at 42, 62 or 82?

The answers to this quest is wrapped up in the following posting I did a few days ago. If any of this seems difficult, please go to and receive for FREE my special report, entitled Job Free Income.

Here’s the posting: There is an example of Writing A Covered Call in a few paragraphs.

Hi there. We will start with a short conversation on the paramount question when it comes to Writing Covered Calls. The question which controls not only decisions to be made, but the thinking process that leads up to making better decisions.

I just used the word better in the last sentence, and all in all, that may be an understatement. Better usually means, good, better, best, but when it comes to the stock market, much of this centers on what is best for you. To go there we need to bring up your experience, your risk aversion and rewards, and simple, mundane things like the time you have to watch your trades.

Here is the over-arching question is this: “Do I want to sell the stock?” Yep, simple, yet powerful. Let me give another Wade Cook rule of thumb: I do not buy options to actually buy the stock; and I do not sell options to actually sell the stock. Take a moment and internalize that before we move on.

I Write Covered Calls to take in the income. Selling the stock is usually an afterthought. This is one reason I keep say, “I like slightly ‘out-of-the-money’ options. For example: If I have a stock at $5.80, the $5 calls will have a rather large option, the $5.50s, if they exist will be tempting, and the $6 calls will be less—NOW.

Let’s do the $6 calls. We’re about to use Assets to Produce Income. $5.80 for a stock. Okay, let’s buy 1,000 shares. Now we sell the option, allowing someone to have the right to buy our stock at $6. The market is gong to give us cash, in on day, for someone to gain the right to buy our stock. These options are going for 50¢. We have 1,000 shares, so we take in $500. That’s now our money.

This is income we receive for taking on the obligation  to sell our stock at a price we like. Remember we bought the stock for $5.80 and if we actually sell the stock we’ll make another 20¢ times our 1,000 shares, or $200. That would be $700 of income. We have all of our original money back, and $700 in profits. Tell me what you’re doing to take $5,800, or $2,900 (margin, you only have to put up half of the money) and make $700 for one month—and you can do this again next month and the month after.

I think you realize that if you sell the $5s, much of the in-the-money portion is embedded in the option premium. The option premium may be 90¢ or $1.20, but 80¢ is in the money. An option will always be worth the in-the-money portion. That amount will ebb and flow with the stock price.

Move up to the $6s and the options might be going for 50¢. It’s all out of the money. Yes, it’s less, but you may just get more movement in this option, and therefore be able to buy-back the option and get another sell off on the next rise.

The most trades in one month that I’ve done on one stock is five trades—on Netflix (NFLX) and Qualcom (QCOM). Those were amazing months. All of these were with slightly out-of-the-money options. Once or twice they were near the money. Sometimes we call this at-the-money, but they often move so quickly, it’s in or at or out of the money.

So, to summarize: If you don’t really want to get off a second trade, sell the option close to the money option. If you sell a lower strike price option, then watch the movement of the stock and see if other opportunities come your way.

Remember, when you buy an option you only make money when you sell it. When you sell an option—say as a Covered Call—there are many more things to consider:

  1. Keep the position open and get called out or not.
  2. Buy back the option and consider reselling it again on a rise in the stock price.
  3. Buy back the option and then sell the stock.
  4. Buy back the option and sell the option at a different strike price—down or up.
  5. Buy back the option and sell the next month out.
  6. Sell part of the stock position and write calls on the balance.
  7. Buy back the option and leave the stock alone—hoping for a rise in the stock price.
  8. Wait until the time gets close to the expiration date and step in with a buy-back and roll-out. You could also check and see if sell a short-term option is good.
  9. The underlying stock presents some benefits. It may grow in value. The buy-back allows you the chance to take back control. The company may pay a dividend. There may be a stock split.
  10. Use the option premium to buy more stock and sell more call options. See R.U.N.—Ramp Up Now—in the Paid to Trade.

That’s a lot to think about, but this thought-provoking process may just pay off handsomely. That’s our aim in sharing this information.

I want to share a few additional insights. Do you remember THE PRICE IS RIGHT? I saw it again the other day. I had no idea it was still on TV. They would say, “Behind Door #1—we have .  .  .”

There were three doors. Years ago I shared what you just read, but it was, “Behind door #4, then #7, etc. I went through the list given above. I just sat to type this, and they just rolled off my fingers—nimble phlanges that they are.

But right now, you are the only people in the country who get to experience this. These are real and will bring you more profits. Again, most people who work with options have one choice after they buy an option and that is to sell—at a profit or loss.

That’s the power of this discussion. When you sell an option to open a position, the above future choices open up to you. There are so many ways to make money—more specifically, nine ways to keep market forces to work for you. When you sell the call option you put time and implied volatility to work for you. You put money in your account, and then you wait it out—actively and/or aggressively—and see what the market gives you.

And this doesn’t bring up the potential profits on the underlying stock and all the future monthly premiums you’ll take in. This is so exciting. I hope you understand our passion—there are excess monthly profits waiting for you.

© 2016 Wade B. Cook. All Rights Reserved. Visit Wade at Order the Special Money Report,  Job Free Income. It’s FREE.


“If you stand up and be counted, from time to time you may get yourself knocked down. But remember this: Someone flattened by an opponent can get up; someone flattened by conformity stays down for good.”

                                                                   —Thomas J. Watson, Jr.

Doomsday Purveyors

Well, it’s September 30th, the latest touted day for the earth to end. Okay, that’s a bit of a stretch, but at least these so-called purveyors of doom say the market will crash, and/or the world currency will fall away.

I’ve been listening to garbage like this for 40 years, and almost invariably these people have something for sell—usually a newsletter for $79. They scare the crap out of you and then try to sell you the remedy.

Please allow me to chime in with a short comparison between the Bulls and Bears—especially as it relates to crashes and corrections. First, a few definitions. A Bull Market is defined as a market or a stock that moves up 20%. A Bear Market conversely is a market that goes down by 20%. Seems easy, but it can be shrouded in manipulation—usually depending on your bias or agenda.

One can manipulate the time periods, the length of the event and even pick and choose different sectors or stocks. If a devious person tries hard enough they can prove most anything. I’ve studied their writings for years and they are good at obfuscating facts. Legerdemain abounds.

The average Bull Market last about 6 to 9 years. The average Bear Market last about 9 months. These are real and use averages over several years. The point is to bet on the Bulls. Optimism usually wins.

For example, many of us can remember the market crash of 1987. It happened in the fall—oooohhhh, that treacherous October. The market went down about 30%. Here’s a point to show how fast things recover. If you had $100,000 in the market, it would have backed off to about $70,000. But 13 months later the value was back up to $120,000.

The real strategy would have been to buy at the low—$70,000 to $120,000 in 13 months. But the other lesson we can take from this is to not panic. Stay calm. Keep you powder dry, meaning to keep some cash available for buying opportunities.

And don’t get caught up in the selling machines of these promoters of panic.

A $50 Political Lesson


Recently, while I was working in the flower beds in the front yard, my neighbors stopped to chat as they returned home from walking their dog. During our friendly conversation, I asked their little girl what she wanted to be when she grew up. She said she wanted to be President someday.
Both of her parents, Democratic Party members, were standing there so I asked her, “If you were President what would be the first thing you would do?” She replied… “I’d give food and houses to all the homeless people.”
Her parents beamed with pride! “Wow…what a worthy goal!”
I said…”But you don’t have to wait until you’re President to do that!” “What do you mean?” she replied. So I told her, “You can come over to my house and mow the lawn, pull weeds,
and trim my hedge and I’ll pay you $50. Then you can go over to the grocery store where the homeless guy hangs out, and you can give him the $50 to use toward food and a new house.” She thought that over for a few seconds, then she looked me straight in the eye and asked, “Why doesn’t the homeless guy come over and do the work, and you can just pay him the $50?” I said, “Welcome to the Republican Party.” Her parents aren’t speaking to me anymore. Well worth the lesson however.

Wise Quotations

“Mediocrity know nothing higher than itself, but talent instantly recognizes genius.”

—Arthur Conan Doyle

Leisure and solitude are the best effect of riches, because [they are] the mother of thought. Both are avoided by most rich men who seek company and business, which are signs of being weary of themselves. —Sir William Temple.

The fruit derived from labor is the sweetest of all pleasures. —Luc de Clapiers Vauvenargues

It is only by labor that thought can be made healthy, and only by thought that labor can be made happy; and the two cannot be separated with impunity. —John Ruski

The love of retirement has in all ages adhered closely to those minds which have been most enlarged by knowledge, or elevated by genius. Those who enjoyed everything generally supposed to confer happiness have been forced to seek it in the shades of privacy.

—Samuel Johnson

If you divorce capital from labor, capital is hoarded, and labor starves. —Daniel Webster

We demand that big business give people a square deal; in return we must insist that when anyone engaged in big business honestly endeavors to do right, he shall himself be given a square deal. —Theodore Roosevelt (Democrat)

What men want is not talent, it is purpose; in other words, not the power to achieve, but will to labor. I believe labored judiciously and continually applied become genius. —Edward Bulwer-Lytton

August 16th Update

Hi There,

There is a lot of news out and about.

  1. The Dow 30 hit an all time high. It’s still up there, though it’s backed off a little. This has caused many option premiums to diminish in price. Stocks climb a wall of worry. I’m going to post here some of the non-trade commentary that I’ve put on WIN. Watch for it.
  2. There are 60.6 million people between the ages of 18 and 34 who are still living at home—with parents or grandparents. It seems to be their new way of life. This means a serious curtailment in the expansion of the economy—housing, repairs, even car purchases.
  3. Will the psyche change? Yes, when we get a more pro-growth president, and the economy sets to right itself. We don’t need a politician to say he’ll make the country great again. We need politicians to say to the country: “We’ll get the government out of the way, and let Americans make America great again.
  4. This Obama economy has not even reached 3% growth a year. It’s around 1.5% to 2%. Last quarter it was 1.20% and they even just revised that number down.
  5. The difference between 2% and 3% is about One Million job a year.
  6. With the top producers paying all taxes nearing 50%, the incentive to excel is seriously diminished. We’re leading from behind—to quote the military strategy of this administration.
  7. We’re just coming out of earnings season. I still see too many short-term fixes to make the quarterly numbers look good.
  8. The funny fact is that so many other economies around the world are worse than ours, and the money is still reluctantly coming here. Capital is cowardly and will seek the safest place.
  9. Your quote for the day is from Keith Fitz-Gerald on Fox Business News. “At the end of the day, profits make you wealthy.” I like it. It’s a powerful variation on the theme: “Follow Earnings, Follow Earnings, Follow Earnings.”

Keep checking in.

Our Creator

“God is our Creator. We are children of God. A painting cannot become a painter. An invention cannot become like the inventor. But we can become like our Creator. Why would we diminish our destiny by thinking anything less?” —LeAnn Mills

Why Hillary?

Within my mental capacity, I come up short in finding the reasoning behind anyone supporting or voting for Hillary. Can anyone who supports her help me out? What good has she done? Please just name one thing, one stance, one accomplishment that qualifies her to be president.

I think I’m going to have to take more mental supplements to increase my thinking acuity.

My current take on Hillary is that we should not be surprised at all of the lies and corruption. She lives in the land of legerdemain. Sleazy people do sleazy things.