My Job as an Income Investor

  Last spring I wrote a few posts (1, 2, 3) about stock options*. These documented my learning and entrance into the stock market and all its wonders. Now that I've been doing this for about six months, I thought I'd come back to you and update you with how my new job is going! Yep, this is my job, a job graciously given to me by God that I am SO THANKFUL FOR!!! You see, when my husband was job hunting last year, I was his sidekick. I learned the ins and outs of AI for the job market and the great variety of ways to find job listings. I hunted down opportunities and sent them his way. All the while, there was a little voice in the back of my head that said, "What if you got a job?" I knew I wasn't nearly qualified to get a job like my husband's, but I do have an AA and I have a wealth of life experience, so I thought that, surely, I could find something out there in the $20/hour range that I could do for 20 hours a week. That would both contribute to my family and give me something productive to do. But, alas, no matter how hard I looked, I couldn't find anything I was both physically capable of with my chronic illnesses and qualified for with regards to education and job experience. It was more than a little disappointing. Then, last winter, our financial advisor taught us about stock options, and a fire was lit in my heart! This was something I could do! I could take the capital we already had and invest it in a way that brought in regular income. This fulfilled the proverb of the Wife of Noble Character for me in so many ways!

 I've done A LOT of learning over the last six months. I started out just selling call options* against the stock we had from my husband's previous employer. Then, when those call options were assigned, I diversified and began filling out my portfolio with stocks from all the different sectors. Initially, I always sold my call options far out of the money (meaning above the current stock price) so that they were less likely to be assigned. Then, as I started to learn the difference between income investing and long-term investing, I shifted my strategy. 

 What is income investing? Well, most people get into the stock market by buying a stock and hoping it goes up in price, so their investment yields a return, that's long-term investing. With income investing, you're not concerned with the stock going up in price in order to get your return, because you are making money by selling options*. In fact, it doesn't matter at all if the stock goes up $5 or $500 because you will make the same amount. Realistically, you just don't want the stock to go down. Let me break it down for you.

1. 1. Buy 100 shares of a stock
2. 2. Sell a call option* At The Money (ATM) (the next denomination up from the current price) or In The Money (ITM) (below the current stock price).
3. 3. Collect the option sale price
4. 4. Ideally, your option is assigned and then you start all over again the next week.

 So, if I bought 100 shares of Angel Studios Inc (ANGX) for $4.37 per share, it would cost me $437. Then, I would sell a $5 call option* for $0.25 per share, or $25 for the option (x100 shares). This option would expire September 18th, five weeks from now, so it would net me $5 per week or a little over 1% of my $437 investment per week. If you keep doing that over a year, you're looking at 50% return - not bad! That's my target. I usually look for about 1% return when selling options. Now, realistically, I don't end up averaging 1% per week, but I do better than 2% per month. That's because it doesn't always go my way.

 Yep, you win some, you lose some. Turns out, sometimes stock goes down and you get stuck with your money being invested in something that isn't giving you the return you want every week. Now, I've learned strategies that help me defend my positions to avoid large losses, but I'm still not going to be earning 1% per week in these scenarios. 

 It took a while for me to wrap my brain around income investing. You see, at first, I dealt with a lot of FOMO. If I had a stock I bought for $100 and I sold a call option for $101, but the stock went up to $120, I felt like I had missed out on $19 per share. When you're talking about lots of 100 stocks each time (the amount necessary for a call option), that's $1,900 - not chump change! But, on the other hand, if I sold call options far out of the money (OTM - above the current stock price), I didn't make very much income. People just aren't interested in paying you very much for the opportunity to buy your stock at a much higher price that you can in the market today - go figure! For example, take Netflix (NFLX). Today (Saturday, August 15th), it is currently worth $78.16. If I bought it at that price and then sold an ATM option for $79, I could probably get about $0.92 per share, a 1.17% return. But, if that option was assigned at the end of the week, remember, I would actually be selling the stock at $79, not the $78.16 I bought it for, so I would get the increase as well, netting me $1.76 per share or 2.25%. On the other hand, if I sold an Out of The Money (OTM) option for $85 hoping that the stock would go up, I would only get $0.07 per share. That's a big difference! Yes, if the stock went up to $85 I would make $6 more per share or $600 for the option, but if it doesn't (which it probably won't) I get nothing more than the $7 the call option earned. Yes, even with selling options ATM we want the stock to go up some, but if it went up to $79 or $100 it wouldn't matter because I would still be selling it for $79 so that's all the more I could receive. That's where income investing comes in. I am investing for the income not the stock's growth. What I've learned is that there is NO WAY for me to know what the stock market it going to do. Lots of people think they know and they're right sometimes and wrong sometimes. What I do know is that I can get $0.92 per share for selling an ATM call option on Netflix. That's cash money in the bank as soon as you sell it. You don't have to wait for the stock to go up, down or sideways. 

 Let's be realistic, how much money can you actually make doing this? Well, that depends on how much you have to start with. You see, what you make is typically a percentage of what you are investing. So, if you have $10,000 to invest, it would be reasonable to expect to make $50 per week, or 0.5%. Yes, you might make $100, but on average, $50 will be more realistic. That goes up with your investment. If you have $100,000 invested, you're looking at $500 per week, $200,000 is closer to $1,000 per week and so on. You can do this in your IRA or your HSA accounts as well! In fact, it works out quite well to do it in these accounts as you won't lose as much of your earnings to taxes 😝. If you're interested in learning more about income investing, I highly recommend Mark Yegge's Cash Flow Machine videos on YouTube. I have not invested in his program so I cannot speak to that, but I have learned a great deal from his YouTube videos. There's a ton more I could tell you about stocks now, about strategies and technical analysis and timing, but I'm just not sure if you're interested. LMK in the comments if you'd like to learn more about this stuff!

Here's the Thing: I'm not going to get rich doing this, but I'm making as much or more than I had hoped from a part-time job. It is engaging and interesting to me, while also contributing valuably to our family's income. I get to feel like I'm a part of things while not taxing my mind and body beyond my abilities. This is my sweet spot, and I'm so grateful to God for opening the opportunity for me!

* As a reminder, a call option is a contract you set up where you promise to sell your stock at a certain price to someone else until the expiration date. For example, I might sell a call option for my Netflix stock saying I will sell it to you for $80 any time between now and next Friday, August 21st. That would be a Netflix $80 Call expiring 8/21/26.