by Laurie Itkin “The Options Lady”
I remember the “gold old days” (and I’m not that old) when you could put your savings into an interest-bearing account or certificate of deposit (CD) and earn anywhere between 5 and 10% per year. Savers were rewarded. All they had to do was put their hard-earned money into an account, do literally nothing, and let it grow.Those days are gone. I recently checked www.bankrate.com to find out the average interest rate on a one-year CD. I was shocked to see the average rate hovers around 1%. Tie up my money for five years? I get a paltry 1.75%.
Reporter Jennifer Bjorhus of the Star Tribune recently wrote an article entitled, “Low Interest Rates Throw Wrench Into Retirements” that profiled current retirees and those soon to retire. It was an eye-opener regarding the challenges people face in this historically-low interest rate environment. In the article, Ms. Bjorhus interviews Roger Aliaga-Diaz, a senior economist at mutual fund giant Vanguard Group. He expects investment grade bond portfolios to average returns of 2-3% for the next 10 years. “That’s scary,” Aliaga-Diaz says.
This is exactly why at The Options Lady I teach people how to trade covered calls, which is a combination of 100 shares of stock and the sale of a call option tied to that stock. Instead of putting money in a CD, money-market account, or mutual fund, I can buy shares of stock or exchange-traded funds (ETFs) and sell calls against those assets to generate monthly income.
This is the new way to generate those 5-10% returns you used to generate doing nothing. Sure, it takes a little bit of work, but I would rather earn 1% a month than 1% per year. And, with compounding, that 1% per month translates into more than 12% per year. Covered call writers I know average returns of 1-3% per month (12-36% per year). The returns on the low side are generated by using diversified ETFs and blue-chip stocks that don’t move around a lot and on the high side generated by growth stocks and companies whose share prices go up and down a lot.
If you are interested in getting a comprehensive education join our “Ask The Expert Webinar” when the The Options Lady will discuss and answer your questions on how to “Earn Monthly Income From Stocks You Already Own”.