EP 116: Using The Google Stock Split Like Rental Income

This episode, I want to talk about one of my favorite strategies, the covered call. If you aren't familiar with this, no need to worry. 

Let's break it down so you can possibly treat stock like a rental income property and "collect rent" every single month. 

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The goal of covered calls is to first try to find where the stock will hit support, or where it's close to being done selling off. 

Think about the stock and evaluate some fundamentals about the company, such as what you think the company is worth.

Once that level is identified and the stock is at that level, it's time to act. Just like how people wait for the housing market to crash, we want to purchase that stock at a reasonable price. 

A great example right now is Google.

Google just went through a stock split, so instead of being $2,000 a share, they did a 20:1 split. Now you can pick up a share of Google for around $100. 

At the time of this post (7/25/22), it's trading around $107-$108 a share. 

For this strategy, you would need to buy 100 shares. You can then sell a covered call against your stock, which means someone can "call" (or purchase) that stock away from you at a specific price you set. 

Breaking down this strategy in a real life example, I bought 500 shares of Google at $108, which cost me about $54,000.

I look at this purchase as if I bought a rental income property for $54,000 in a very nice neighborhood. A house in a nice neighborhood isn't going to go to $0 - a stock in a good company isn't either.

For this, I can set the call price at $113. I already own the stock at $108, and this allows someone to buy it from me at $113. In order to do so, they need to pay $1.33 per share up front, so I earn $665 right away with all 500 of my shares ($1.33 x 500).

At the end of the week, if the stock isn't at $113, I get to keep the $665 and my 500 shares of Google. If the stock is above $113, the person buying gets to pay the $113 price, and I get to keep the $665 they already paid up front. 

Ideally, I don't want the stock to hit the $113 price. I want to keep what I own and be able to do it again the following week. 

If I look at that weekly income I can generate on a monthly basis, I would be able to earn an additional $2,660 each month. 

The power of the stock market is not just how to make money, but how can you fund your lifestyle?

How can you learn more and possibly make this strategy work for you? Check out our Options Explained course at Power Trades University.