🧠 STEP 6d — STOCK OPTIONS (INCOME, HEDGING, LEVERAGE)

💰 SECTION 3 — OPTIONS FOR INCOME (THE FOUNDATION STRATEGY)

Income strategies are the safest and most repeatable use of options.

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They work best when:

• Markets move sideways

• Markets move slowly

• Markets are volatile but range-bound

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🟢 Strategy 1 — Covered Calls (Getting Paid to Sell Stocks)

 

What It Is

You:

• Own 100 shares of a stock or ETF

• Sell a call option against it

• Collect premium

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If the stock:

• Stays below strike → you keep premium + shares

• Goes above strike → shares get sold at profit + premium

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Why This Works

• You get paid for agreeing to sell at a price you already like

• Lowers your cost basis

• Produces income on assets you already own

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Best Used When

• You’re neutral to mildly bullish

• You’re holding long-term positions

• You want cashflow

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Common Mistakes

• Selling calls too close to current price

• Using volatile meme stocks

• Forgetting tax implications in taxable accounts

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🟢 Strategy 2 — Cash-Secured Puts (Getting Paid to Buy Stocks)

 

What It Is

You:

• Want to buy a stock at a lower price

• Sell a put option

• Set aside cash to buy shares if assigned

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If the stock:

• Stays above strike → keep premium

• Falls below strike → buy stock at discount

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Why This Is Powerful

• You get paid while waiting

• You buy stocks at prices you choose

• Higher win rate than buying outright

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This Is How Professionals Enter Positions

Instead of:

“I hope it drops so I can buy it”

 

You say:

“Pay me while I wait.”

 

🟢 Strategy 3 — The Wheel Strategy (Income Machine)

A systematic approach:

1. Sell cash-secured puts

2. Get assigned shares

3. Sell covered calls

4. Repeat

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Creates:

• Continuous premium income

• Long-term ownership

• Discipline and rules