Retirement Income

If your retirement income needs to be at least $5,111 a month.  I will show you an incredible income generating strategy.

Why $5111?

This is the average US household budget. So, if you’re below this, then you’re doing even better.  If you’re above, then you can scale the solution I’m about to show you accordingly.

I can replace this $5,111 a month expense using a very simple trading strategy that is actually less risky than just holding straight stock.

No, this does not involve crypto at all.

Capital Requirements of $337K

First, the more capital you have the better, and the less risk you must take to make this work.  Also, if your monthly budget is above this for your retirement income, then you will need more capital.  However, for the average household, this will be sufficient.

The goal is to generate $1,180 a week which will give you the income you need to clear $5111 a month.  Of course, this is not taking taxes into consideration so keep this in mind as we step through this exercise.

Let’s jump in already!

First, buy 1000 shares of $QQQ for 337.00 a piece (going price at the time of this thread).  This deploys 100% of our capital and we’re invested all into stocks.

Next, we sell the weekly call option on a Monday for at least $1.17 a share.  Because we have 1000 shares, we sell 10 call options.

At the time of writing this would be the March 11, $349 call option for $1.28 a share.  This money is deposited into our account on Monday and we have access to this money immediately.

So what does this all mean?  What is a call option?

A call option, which we sold, gives the buyer the option to buy our shares at $349 a share any time between Monday and the coming Friday. 

Because we have 1000 shares and we got paid $1.28 a share for our options, we just raised $1,280 in cash.

This makes no sense

I know this seems weird, and makes many first-time option sellers and stock investors wonder what exactly is going on.

A speculator pays you for the right to buy your shares at a set price in the future and pays you today for this option to buy your shares at a set price any time between Monday and Friday.

Should the price rise to $355.00 within the week, you will quickly understand why someone was willing to pay you $1.28 per share for the right to buy them at $349.00.

However, 80% of the time they will expire worthless because the shares will not rise fast enough.  Short sellers will also buy these to hedge their negative bet.

Rinse & Repeat

Next, we just rinse and repeat this trade week after week and generate our retirement income.

While it is NOT risk-free money, your risk is well rewarded, and you generate weekly cashflow off your shares.  Always remember that $1,280 is yours to keep regardless of the outcome.  But you will need to settle up every Friday.  

If the shares are below your strike price, then nothing happens, and you get ready to repeat the trade on Monday.

If the shares are above $349.00 then you can let the shares go at the agreed upon price.

So, can this only be done on $QQQ?

While my favorite is $QQQ, you can also do this with $SPY. These big ETFs are liquid, with an unmatched options market.  Many Vanguard ETFs have them, but they won’t be as liquid, and you can’t repeat the trade each week with many Vanguard funds.

Dividend Bonus

As a bonus for your retirement income, you will also earn $1960 in dividends each year.  While not a lot, it’s better than nothing and paid quarterly

Closing Thoughts

Selling covered calls to generate retirement income is a terrific strategy and can help meet many financial goals.  What’s more, you don’t have to do them against your entire portfolio.  Just do it against some shares to start until you get used to the trade.

If you would like to learn more, I have a detailed beginner’s course here: