Last week I posted that I purchased 100 shares of GE (General Electric) as part of my strategy for creating new income streams. To learn more about this strategy, please review my post – Combining high dividend yields with covered call options. Today, I would like to alert my readers that I have added 100 shares of BAC (Bank of America) to my portfolio using the same strategy. While I understand there is a current market downturn in the financial sector, I feel that this is an opportunity to invest in a stock that I have wanted to own for some time. I also understand that the future looks very bleak for this sector and there will probably be more downward pressure on the stock in the near term. However, I believe that selling Covered Calls to hedge against this purchase will help to reduce this downward pressure on the stock.

Details of the Trade
The follow list details the trading activity -

• Purchased 100 shares of BAC for an average share price of $25.35 (commission included).
• Sold 1 July 27.50 Covered Call contract for net proceeds of $54.99

I continued to follow my strategy for combining high yielding stocks with covered call options and met the following criteria that I have been using -

• The stock purchased must be one that I don’t mind owning over the long term. As I stated earlier, I have wanted to own BAC for some time. I think that long term, BAC will be fine and I will look back at this purchase with a smile on my face.
• The stock needs to pay a steady dividend. At the time of the purchase, BAC was yielding around 10%. I also completely understand that there is a chance that the dividend could be cut – although management has said otherwise.
• The Options activity on the stock needs to be attractive.
• I must have enough resources to purchase a minimum of 100 shares required to sell 1 Covered Call Options contract.

Risks
As always, there is risk involved in trading stocks and options. I have identified the following 2 potential risks in making this transaction.

• Stock Jumps – One possible risk is losing out on the stock. In the event that BAC jumps past $27.50 per share before the 3rd Friday in July, I would probably lose out on the stock. Let’s face it – this is not going to happen in the next 2+ weeks. If it did, I would return over 10% on my transactions in less than 1 month.
• Stock Drops – The other scenario and risk is if the stock has a major drop along with the rest of the market. This is a concern given the current market, but I believe that selling Covered Call options on a monthly basis will hedge against this trend.

Opportunities
I believe that this transaction provides an excellent opportunity to generate monthly cash flow which can be reinvested into purchasing more and more assets. This fits with my long term strategy of becoming financially independent. I will continue to sell Covered Call option contracts against my position when appropriate to generate this additional income.

What do you think about the trade? Do you think this is a good way to generate monthly cash flow?

Disclaimer - I am not recommending the purchase of Bank of America stock in regards to this post. Instead, I am detailing my strategy for generating monthly income by using this stock as a catalyst. Please do your own Due Diligence before making any purchases. Thanks!

Related posts:

1. Passive Income via Covered Call Investing
2. Creating a new Income Stream – General Electric
3. Wachovia Covered Call Contracts

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Last week I wrote a post that provided a list of alternative income streams that I am currently using or plan to use in the future. One of those income streams was to Shop at Pharmacy’s and make money. How can you make money shopping at pharmacy’s you may ask? I thought the same thing until a few weeks ago. I have always loved to shop at the national pharmacy chains including CVS, Walgreens, and Rite Aid. In the past I would try and use coupons when I could to get the best deal, but never really paid that much attention to monitoring the ads really close. Then I came across several other blogs (i.e. Money Saving Mom) devoted to shopping at discount stores using any coupon, rebate, or cash back reward available. That is when I realized that I could actually make money by shopping at some of these stores and get products that my family can use!

Over the past several weeks I started to pay very close attention to the Sunday ads for the national pharmacy chains to find the best deals and opportunities available. I also started to collect any coupon available that came in the Sunday paper or that I found online. I have a goal to reduce my families grocery budget, so clipping coupons was one logical start in reducing this expense. After monitoring the ads and reviewing other blogs, I found two opportunities last week that allowed me to make money and get some products that my family can use. Now I will mention that I didn’t make a lot of money off of these transactions, but it is hard to pass up getting free products that you can use and where you can actually make a little money The list below provides details on the two opportunities that I found at CVS and Rite Aid -

Rite Aid

• Colgate Toothpase
• Bought four 7.6 oz. Colgate toothpaste for $15.96.
• Used four $1.50 off 1 Colgate toothpaste coupons for $6.00 off.
• Received a Single Check Rebate for $10.99.
• After Tax and discounts I made $.33 off of this transaction.
• Fructis Conditioner
• Bought one 6.8 oz. Fructis Conditioner for $2.99.
• Used one $1.00 off coupon.
• Received a Single Check Rebate for $2.99.
• After Tax and discounts I made $.79 off of this transaction.
• Total Made – $1.12

CVS

• One Touch
• Bought One Touch Glucose Monitor for $29.99. We gave this to my brother-in-law who was just diagnosed with Diabetes.
• Used $20.00 off coupon.
• Sent in Mail-in Rebate for $29.99 for the Glucose Monitor.
• After tax and discounts I made ~$17.98 off of this transaction.
• Revlon Makeup
• Purchased Revlon Makeup for my wife for $9.99
• Used $3.00 off CVS coupon received a few weeks earlier.
• Used $2.00 off manufacturer’s coupon.
• Received $9.99 back in Extra Care Bucks that can be used in the future at CVS.
• After tax and discounts I made ~$4.66 off of this transaction.
• Band-aid’s
• Purchased 1 pack of Band-aids for $2.99.
• Used $.50 off coupon.
• Received $2.00 back in Extra Care Bucks that can be used in the future at CVS.
• After tax and discounts I spent ~$.66 on this transaction.
• Total Made – $21.98

After both transactions listed above, I made approximately $23.10 by shopping at CVS and Rite Aid last week. I will note that this amount may be smaller depending on the One Touch Glucose monitor rebate for $29.99 that we sent in. I have heard that the rebate may not be for the full amount as our entire CVS bill was around ~$15.00. Some blogs have reported that they will only return the amount of your total bill if it is less than the total rebate amount. Either way, we still came out making money during the week and got products that we will use!

Will this income stream make me rich? No. However, what it will do is allow my family to reduce our money grocery budget which makes more money available to purchase assets.

Do you shop at pharmacy’s to make money or get free products? What kinds of deals do you find?

Related posts:

1. How I made $17 in Almost Passive Income
2. Discount Shopping is not always perfect
3. Take Advantage of Discounts for the Best Shopping Buys in January

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A few days after posting my article on – Creating Alternative Income Streams, I got an automated email message sent to me stating that I had earned $.04 for the month of July from an income source I completely forgot about. Now $.04 is not much to get excited about, but it is also a completely passive income stream at this point, as I did nothing the entire month of July to receive it.

This additional income stream that I forgot to mention in my prior post is from a website called UpDown. If you have any interest in trading stocks or even practicing buying and selling securities, I would recommend this as an alternative income source. Basically UpDown gives you $1,000,000 of virtual money to manage in a portfolio where you buy and sell stocks. There are three possible ways of earning income:

• Beat the market – UpDown will pay you actual money for your performance on a monthly basis. Depending on how much you beat the S&P 500 index by in the last month and since you started will determine if you are paid and what that amount would be. Beating the market by a wider range consistently over time results in higher income generated. I earned $.04 in July and also didn’t even realize I earned $.05 back in June. I had singed up for this site back in May of this year.
• Submit Stock Analysis – UpDown also has a feature that let’s its members write their stock analysis so that other members can research and review. Depending on your rating of the stock analysis by other members, you could potentially receive compensation for your posts.
• Refer Friends to UpDown – UpDown will also pay you money for referring friends and colleague’s to open up an account. This is where it gets interesting. UpDown will pay you 10% of the earnings from all of the friends you have referred.

So far in two months, I have earned $.09 for not really doing very much but purchasing 4 high quality stocks (GE, BAC, CVS, and IR) for my virtual portfolio. I hope to use this tool as a way to test out some of my stock strategies and analysis before I put my hard earned money to work in the real world. Any additional income that I generate from this site will be an added advantage of using this site! If you do not already have an account and would like to sign up, please consider sending me an email (passivefamilyincome @ gmail dot com) or posting a comment and I will send you a referral link.

Related posts:

1. What is Portfolio Income?
2. Creating a new Income Stream using Prosper
3. Adding Bank of Amercia (BAC) to the portfolio

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Over the past few weeks, I have read several blog posts questioning the risk vs. reward in peer-to-peer lending. One article I read on Enginero.com asks for others opinions on their experience loaning out money using these “micro-loans”. I decided that I would write an article on my brief experience in the peer-to-peer lending world.

One of my goals for 2008 was to create two new income streams other than my day-to-day job. As a result, back in January I opened up an account on Prosper.com in an attempt to create a new income stream. I opened the account with an initial $250 investment with the intent of funding 5 different $50 loans. At that time, I was learning the process of bidding on loans and was not concerned about what type of loans to bid on. I then setup an automatic withdraw of $25 each week from my bank account with the goal of funding 2 new $50 loans per month. In February, I decided to invest an additional $1,000 into my Prosper account to quickly build up my portfolio.

As of today (May 21, 2008), I have funded 38 total loans with an average credit grade of ‘B’ at an average rate of 16.4%. I have had success so far in the first 5 months of bidding, with only having an issue on 1 funded loan. The 1 late loan that has been an issue is currently in collections. I have also had 2 of the 38 loans already paid off. Below is a chart of my 38 loans that have been funded in my Prosper account:

After settling in with Prosper, I realized that I needed to focus my bidding on specific types of loans that would fit into my risk tolerance. It is my opinion that the Credit Grade alone is not enough criteria to bid on loans. In fact, the one loan that has been an issue in my portfolio has an ‘A’ credit grade. I put together a saved query in my account that I use daily to search out and bid on loans.

• Credit Grades = AA, A, B, C, D – I filter on all credit grade loans other than ‘E’ and ‘HR’ loans. I am fine with bidding on ‘C’ and ‘D’ credit grade loans under certain circumstances.
• Loan Category = Debt consolidation – I now have decided that I will only bid on loans that are focused on debt consolidation. I want to help people who are trying to get out of debt. Most of these loans involve people who are trying to consolidate their multiple credit cards into one monthly payment with a combined lower interest rate.
• Debt income ratio = 0% – 50% – I won’t bid on any loans where the debt to income ratio is above 50%. Basically, I want to make sure the people are bringing in enough money to pay their bill.
• Loan Amount = $0 – $15,000 – I stay away from any loan that is over $15,000. Any figure above that scares me and I won’t touch it. My screen is setup to include loans up to $15,000 but I use discretion on loans above $10,000.
• %Funded = 50% – 100% – I will only bid on loans that have a high probability of being funded. Any loan under 50% funded either stands a good chance of not being funded or has several more days to stay open. I was frustrated when first starting out as I bid on some loans that never got funded or had been open for several days. These types of bids hold your money up for several days while most of them never get funded.
• Delinquencies in last 7y = 0 to 2 – I give people the benefit of past mistakes and allow up to 2 delinquencies in the past 7 years. Anything over 2 will not be included in my screening process.
• Public records (in last 10y) = 0 – Basically, this criteria says that I will never bid on anyone who has declared bankruptcy in the past.
• Rate = 15% or higher – This is actually not included in my search criteria as I want to see all available listings to bid on. However, my goal is to bid on loans above 15%, generally falling into the 15% – 20% category. I also get suspicious of loans above 20% and the ability for people to pay them off.

As you may note, some of the loans in my portfolio don’t match the criteria defined above. I have modified the types of loans that I now bid on after becoming familiar with the Prosper lending process. In addition, on some occasions, I may bid on ‘AA’ or ‘A’ credit grade loans that don’t meet the criteria defined above that are under $5,000. Typically these loans are for people who want to reinvest in Prosper by taking out a loan for a certain percentage and then use the proceeds to fund other loans at a higher rate. I am willing to bid lower for these types of loans as they are not as risky in nature.

Do you have a Prosper account? If so, what type of success/failures have you experienced? Please take the time to vote in the poll found below. If not, have you ever considered opening one up?

Related posts:

1. Tracking a Bad Prosper Loan
2. Tracking a bad Prosper loan – Update #1
3. How to save time using Prosper

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I read an article the other day on TheStreet.com on new ways to make money from recycling. I am a big advocate of recycling and think every family should participate. Unfortunately, the town in which my family lives in does not currently have a curb side recycling program. I did not even consider this when we decided to purchase our home in a new development in this town. Instead of offering curb side recycling, the town has about 4 transfer stations where residents can bring in their recycled materials along with trash and large items like stoves, washes & dryers, etc.

Since moving in, we have been stockpiling aluminum cans, glass bottles, newspapers, etc. in our garage and then take a trip once per month to unload our recycled materials at the transfer station. This has become a cumbersome process as we use up a lot of extra garage space with these materials. In addition, we have to sort through the materials each month before loading them into our car to ensure no little critters have crawled into the boxes so they don’t end up staying in our vehicle. All that being said, we still feel so strongly about recycling these materials, that we go through this process each month.

Instead of going through this dirty and tedious process each and every month, I have set out on a mission to find alternative ways to recycle our household items. That is when I came across the New Ways to Make Money Off Recycling article which I earlier mentioned. The article provides the following list of companies that will actually pay you money for recycling products -

1 – RecycleBank
2 – Greenphone
3 – MyBoneYard
4 – Feed Your Player
5 – Terracycle

Do you recycle? Have you ever used one of the recycling programs listed above? Do you know of any other recycling programs that pay you money that are not on the list above?

Related posts:

1. Green Business – A Passive Income Opportunity?
2. Go Green and Save Money
3. Sustainable Personal Finance: Treading on the Green Route to Save Money

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