An investor can make in different ways from the stock market. The most common ways are through dividends and interest. Dividends are more tax efficient for Canadian investors than interest. Dividends from a foreign country and interest are taxed at the marginal tax rate.
Is there another way? Another way that an investor can get cashflow from the stock market is though selling a covered call. A covered call is when an investor sells an option and is obligated to sell the 100 shares before or at expiration. As the investor is the seller in this transaction, he or she is paid a premium up front.
The investor can make money whether the market goes up, down or sideways. If the market goes down or sideways, the investor gets to keep the premium. If the price of the stock goes above the strike price, the option can be assigned and the investor will have a bigger gain or smaller loss on the selling of his or her shares.
Today, I sold a call option in Royal Bank, which I currently own 100 shares.
# of contracts = 1
strike price = $80.00
Premium including commissions = $64.05
Expiration date: Jan 16, 2016
EDIT : the premium was $0.75 per contract
commission = $10.95
Disclosure: Long RY
am not a financial planner, financial advisor, accountant or tax
attorney. The information on this blog represents my own thoughts and
opinions and should NOT be taken as investment or business advice.
individual should do their due diligence to make their own financial
decisions based on their financial situation and tolerance for risk.