Dividends and covered calls are two ways which an investor can make money off of a stock that they already own. It is a pretty nice thing to get some passive income off of an investment which you already own.
So what are they? Almost everyone is aware of dividends. When a corperation has a dividend paying stock they pay their investors a small percentage of their profits. By keeping a dividend stock an investor can profit month after month from their share of the dividends.
If you have enough money then you may be able to make a nice income by investing into dividends.
This can be a nice way to make some cash flow off of an investment, but it is not the only way. An Investor can also make money by writing covered call. When an investor writes covered calls they sell another investor the right to buy their stock at a specific strike price on or before a specific date.
The advantage to this is that it can pay pretty well. An investor can recieve a pretty nice premium each month simply by selling covered calls.
However you have some risk when you sell a call. If the stock makes a big move in the near future that investor would be forced to sell their stock and miss out on a big chunk of the move. So basically you take on some risk of missing a profit in the future for some money now.
Each investor has to decide whether it is worth the risk or not to sell covered calls. Selling covered calls and investing into dividend paying stocks are two great ways to make some cash flow from a stock that you own. If the stock also increases in price during that time then so much the better.
