Passive Family Income » stocks

Creating a new Income Stream – General Electric

John S. — Fri, 27 Aug 2010 11:13:57 +0000

Recently, I have been looking to create a new income stream by purchasing an asset which will generate monthly cash flow. I decided to purchase 100 shares of GE (General Electric) earlier this week near the stock’s 52-week low. I have always admired General Electric as a company and found a great buying opportunity. While I believe there are several rough quarters in front of GE, I still think it is an excellent company and will be fine for years to come. As part of this purchase, I followed my strategy for Combining high dividend yields with covered call options. The stock purchase met the following criteria that I use in this strategy -

The stock purchased must be one that I don’t mind owning over the long term. As I stated earlier, I have always wanted to own GE and found an opportunity this week to make the purchase.
The stock needs to pay a steady dividend. At the time of the purchase, GE was yielding around 4.5% and has had a strong history of raising it’s dividend.
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.

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

Purchased 100 shares of GE for an average share price of $27.55 (commission included).
Sold 1 July 29.00 Covered Call contract for net proceeds of $31.99

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 GE jumps past $29.00 per share before the 3rd Friday in July, I would probably lose out on the stock. Now, I don’t really view this as a risk but more as a lost opportunity. If I were to lose out on the stock with a jump in the price, I would still profit – $168.99 in less than one month for a 6% gain. If I could raise 6% per month for the entire year, I could retire early.
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 definite possibility, but one that I can live with. As I stated above, GE is a stock that I don’t mind holding long term. I would continue to sell Covered Call Options when applicable against the stock to generate the monthly income. In addition, assuming that they don’t completely cut their dividend, I can also collect each quarter and increase my net shares.

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 plan on using following the steps listed below assuming the stock does not have a huge jump past $29 per share over the next several weeks.

Sell Covered Calls – If the July 29 Contract expires, I will then look out to August to find an opportunity to sell another Covered Call contract against GE which will bring in monthly cash flow. The plan is to continue to do this each and every month depending on the current market situation.
Reinvest Dividend – I will plan on reinvesting the quarterly dividend directly back into the stock which will increase my total shares and help to generate additional income down the road.

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 General Electric 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!

Originally posted 2008-06-25 07:15:39. Republished by Blog Post Promoter

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New Income Stream – Virtual Stock Portfolio

John S. — Mon, 23 Aug 2010 11:25:40 +0000

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.

Originally posted 2008-08-13 07:42:44. Republished by Blog Post Promoter

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Wachovia Covered Call Contracts

John S. — Mon, 09 Aug 2010 11:36:21 +0000

Today is the September Options expiration day. One of my more successful passive income streams is selling covered call options against stocks that I own in my portfolio. This month, I have five covered call contracts open on shares of Wachovia that I have in my portfolio. I own 500+ shares of WB and have been selling covered call contracts against the stock since April. Below is a breakdown of the income generated from selling these option contracts.

April Calls – $96.99
May Calls – $303.25
June Calls – $253.97
July Calls – $81.98
August Calls – $138.98
September Calls – $88.98
TOTAL – $964.15

The 500+ shares that I own had been in my portfolio for some time. It wasn’t until April of this past year that I decided to increase my monthly cash flow by selling these contracts to hedge against downward pressure in the financial sector. My strategy has been to stagger the contracts across a few key strike prices each month. In the event, the stock has a significant increase, then more than likely the contract(s) will be called. I am actually looking to unload a good portion of my Wachovia holdings because of uncertainties in the financials and with the long-term health of the company. I am in the process of spreading my holdings across many different high yielding stocks and reducing my stake in this company is part of that plan.

Today, it looks like several of my contracts will be called with the huge run up in prices of the financials in the past two days. Just two days ago, WB looked like it could follow Lehman Brothers or AIG and drop under $5. It is amazing what a few days and some positive news makes. I will provide an update on my status next week once the expiration date passes.

On a side note, for those interested in selling covered call options, check out my article on eHow titled – How to sell covered call options. If you have the stomach to withstand the ups and downs, the financial sector is an interesting place to sell covered call option contracts. The volatility is amazing and has been for several months, which allows for more money to be made by selling these contracts. On the other hand, there is tremendous risk involved by trading in this sector.

Originally posted 2008-09-19 10:32:43. Republished by Blog Post Promoter

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Recession in America – Trading Stocks not Investing

John S. — Mon, 02 Mar 2009 13:29:34 +0000

This is the fifth in a series of posts focusing on the Recession in America and the impacts it is having on things other than your 401k and personal finances. Check out the first four posts in this series titled -
Recession in America – What about our pets?
Recession in America – Home Foreclosures
Recession in America – Unexpected Landlords
Recession in America – Abandoned Subdivisions

How has your 401k held up in these difficult economic times? I know that mine has lost a lot of its value in the past 12-months and chances are it will get worse. I am not the only one who has seen a drastic decrease in the value of their 401k and retirement accounts during this period. Many Americans have recently lost a lot of their retirement savings because of the economic crisis.

How is your job security these days? Are you one of the millions of people who have lost their jobs in the past year? If you have a job – how secure do you think it is? Fortunately, I still have my job – but who knows, it could get eliminated any day because of budget cuts from my employer.

If you answered yes to any of the questions above or know somebody who is in one of those situations, then you are not alone. Most people across America are experiencing these same hardships. As as result of 401k and job losses, it looks like there is a troubling pattern forming that somewhat resembles gambling. I have been reading a lot of stories recently about the rise in day trading in the stock market. Some discount online brokers are reporting sharp increases in new accounts opening in the past several months. From most reports – these new accounts are for people getting into the day trading business.

There are two big reasons it appears why people are picking up day trading during this recession.

Income – People are picking up day trading as a form of income. Many people who have lost their jobs or are looking for supplemental income have decided to day trade stocks to make money.
Retirement – There is another group of people who have decided to pick up day trading as a way to build back up there retirement portfolio. People have decided to use flipping stocks as a way to hopefully build back the value of their long term investments.

Both reasons I listed above are a little troubling to me. Investors and ordinary people have seen their jobs and retirement nest eggs vanish in the matter of a few months time. Most long term investors, who thought they were doing things the right way, feel like they have been punished for no good reason. Now they have decided to get back in the game by trading stocks short term. I worry because many of these people don’t understand the ins and outs of day trading. While day trading can be extremely profitable for a few who actually know what they are doing, the majority of uneducated investors will get swallowed up. Most of the new day traders are probably not aware of what it actually takes to day trade stocks. In fact, most of the knowledge long term investors have been taught is not relevant when day trading.

Is this another case of our culture wanting to get rich quick? Or is it just a desperate attempt by people to get back what they once had? I hope it is the latter and that we have learned something from this economic crisis – like living within your means and not risking your future for short term gains.

Have you changed your investing behaviors during this recession?

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Passive Income Results – November (2008)

John S. — Fri, 26 Dec 2008 12:05:26 +0000

photo credit: Unhindered by Talent
Every month I like to provide the status of cash that has been generated from my multiple streams of income. These income sources include everything other than my day-to-day job. Several of the extra income streams are passive while others require a lot of my time. Overtime, I plan to make these streams as passive as possible – while creating new and exciting income streams along the way. Creating multiple income streams is very important in today’s economic climate with mounting job losses and a struggling economy.

Income Streams

Stock Dividends: $49.67 – I received a few quarterly and monthly dividend payments during November. My current 3-month (September, October, November) rolling average dividend payments is $71.16. The 3-month rolling average increased by 7% compared to last month.
Savings Account Interest: $.09
Selling Covered Call Option Contracts: $99.97 – I was able to generate some positive cash flow out of this stream during November. This income was generated from selling Covered Calls against my Harvest Trust Energy and Wachovia Bank stock positions.
Prosper Interest: $31.08 – My Prosper income stream declined by almost (9%) compared to October. This was a direct result from several loans going into a charge-off status and the inability to fund any new loans.
Credit Card Rewards: $150.00 – We redeemed $150 in credit card rewards for Target Store gift cards that were used to purchase holiday presents.
Kontera: $5.29 – This income stream is growing (very slowly) over time.
SocialSpark: $11.59 – This income is from some of the last remaining sponsored posts that I have written. I have introduced a new passive income advertisement stream from SocialSpark that I will detail in the December results.
PayPerPost: $34. 50 – I wrote several PayPerPost articles in November to help generate some extra cash.
AdSense: $5.59
Widget Bucks: $.10
eHow: $8.16 – I expect great things to come from this passive income stream in 2009. I saw a 4% increase in earnings compared to last month from this income stream.

Check out my November published articles found on eHow –
1. How to Propagate a Golden Pothos
2. How to Make Allergen Free Pumpkin Bread
3. How to Save Money Dining Out With Your Spouse
4. How to Stay Warm in Your Home
5. How to Reduce Stress During a Recession
6. How to Make Allergen Free Banana Bread
7. How to Buy a Call Option for Profit
8. How to Make Allergen Free Rice Krispy Treats

GRAND TOTAL INCOME – $396.04

November Passive Income Analysis
I saw a slight increase between my October and November passive income results due to some additional gift cards that we redeemed. Without those cards, my results would come in around $250. I am starting to phase out my sponsored post articles in favor of devoting more time to building PFI as well as focusing on my eHow income stream. I have started to see some increases in AdSense earnings (while it is not a lot still) and have a few other things that I started in December that seem promising. I also am planning to start peer-to-peer lending again at LendingClub. I have some major work to do to build my extra income but I am also excited about the opportunities that are available to me in the coming year.

What are your best passive income streams?

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