The Benefits of Selling Cash Covered Puts over Dividends

I have been reading up on dividend investing recently, and am quite fascinated at the prospect of being able to earn passive income. And then I remembered that I have a better investment vehicle and that’s selling options – specifically cash covered puts for the stock that I like.

If I were to do that for a monthly option chain that is at least 30 days out, I can get a fair premium for 10 contracts (aka 1000 shares) at the strike price. I need to have the cash for it, and leverage is zero. So that in the event that I get assigned, I can pay for the stock.

But if it expires worthless, I get to keep the premium, and I will sell another cash covered put for the following month.

Dividend investing on the other hand is a long drawn battle. Dividends is given on an annual basis, and there is no guarantee that they would give. Selling cash covered puts is much easier.

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