How To Earn Double-Digit Income From Visa, Starbucks, IBM, And More…

I can’t believe more people don’t take advantage of this…

For the past few years, my colleague Amber Hestla and her readers have been earning sky-high “yields” from some of the most well-known stocks on Wall Street.

If you simply look these stocks up on Yahoo Finance or another website, you’re unlikely to see these yields published on the main screen. But rest assured, it’s all perfectly legal. In fact, it’s one of the safest methods of earning extra income to be found in any market environment.

All you need to do is be willing to learn a new strategy. After that, it’s simply a matter of logging back in to your brokerage and repeating a similar trade every few months to earn these sky-high “yields”.

Allow me to explain…

We’re regularly finding double-digit “instant yields” from some of the most well-known companies on the planet.

In the past, our research has identified opportunities to collect a 7.8% “yield” from well-known stocks such as Visa… a 12.8% yield from Starbucks… and, as I’ll show you today, a 10% yield from IBM.

The best part thing about these “instant yields” is that there’s nothing complicated about them. To collect, you don’t have to monitor your brokerage statement daily. Nor do you need a million-dollar bank account and access to a high-powered money manager.

In fact, all you really need is 100 shares of a single stock — and the willingness to potentially sell those shares for a profit.

Let that sink in for a moment… I’m talking about getting paid for the chance to sell your stock at a profit.

Getting Familiar With Covered Calls

I’m talking about selling covered calls.

A covered call strategy involves selling call options on stocks that you already own. In exchange for selling the options, you receive upfront payments known as premiums. These premiums can range from a few hundred dollars to thousands of dollars, depending on the size of your investment.

In exchange for paying the premium, the buyer now has the option to buy that stock from you for a specific price, known as the strike price. If the stock is trading above the option’s strike price, you’ll be required to sell those shares to the option buyer. If the stock is trading below the option’s strike price, then the option expires worthless and you keep the premium with no further action required on your part.

Think about that for second… I don’t know anyone who buys a stock without wanting to sell it eventually. Even long-term growth investors usually have a price target for most of their underlying holdings.

So why not get paid while you wait for your stocks to get there?

That’s essentially what covered calls allow you to do. By selling covered calls, you’re generating a consistent income stream while waiting for your stock holdings to appreciate in value.

Since you already own the stock you’re writing the options on, and you’re willing to sell those stocks when they reach your target price, employing this strategy adds zero additional downside risk…

But at this point you’re probably wondering: What if the stock declines in value?

In that scenario, selling covered calls can only help you. Remember, to sell covered calls, you have to actually own the stock you’re writing the option on. So regardless of whether you use this strategy, your portfolio is still going to take a hit from the declining share price. But the beauty of covered calls is that they let you offset some of the damage. That’s because for every premium you receive, you essentially lower your cost basis in that investment.

To see how it works, consider how we’ve done this with International Business Machines (NYSE: IBM).

How To Earn A 10% “Yield” From IBM

Over the years, we’ve been able to generate anywhere from $200 to $400 every two months by selling covered calls on IBM.

Just how much you receive depends on both the length of the contract (how long until the option expires) and the value of the strike price.

For example, right now, IBM is trading at $144. In order to generate what we call “instant income,” investors could sell August $155 calls on IBM for about $1.55 a share. Since each contract controls 100 shares, the trade would generate a premium of $155 (what we call “instant income”.) As long as IBM doesn’t trade above $155 by November 20th last year (the day the option expires), you could have retained your shares and kept the premium you collected as pure profit.

IBM Covered Call: Buy 100 Shares IBM + Sell IBM Aug-20 $155 Call
Stock Price: $144 ($14,400 per 100 shares)
Premium: $1.55 ($155 per contract)
Return On Investment: 1.07%
Expiration Date: August 20, 2021
Days In Trade: 63

Now a little over 1% may not sound like much, but here’s where things get really interesting… Since this trade lasts roughly two months, you could repeat this process up to six times over the course of a single year. Assuming you are able to get that same $1.55 premium every time you sell a call, you would essentially lower your cost basis by $9.30 ($1.55 x 6) for each share of IBM you own.

Said another way, you’re collecting about 6.4% in annual income from IBM. And that’s before even considering IBM’s dividend, which is about 4.5%. When it’s all said and done, that’s a 10.9% yield on IBM. Granted, you may not end up making that many trades throughout the course of a year. It’s purely up to you. But this gives you an idea of what’s possible…

On the other hand, let’s say by the time August 20th rolls around that shares hit $155. In that scenario, all you have to do is sell your shares for a profit. The $1.55 premium is still yours to keep. You will likely also receive a $1.64 dividend during that time. That’s a total return of about 10% on your money. Not bad for a two-month holding period.

IBM Covered Call: Buy 100 Shares IBM + Sell IBM Aug-20 $155 Call
Strike Price: $155
Cost Basis (Entry): $140.81 (stock price – call premium – dividend payment)
Return On Cost Basis: 10.07%
Days In Trade: 63

Bringing It All Together

That’s the power of this strategy. Regardless of what your portfolio looks like, you can dramatically juice your returns by selling covered calls. All you need is at least one stock you’re willing to sell at a profit if it jumps higher.

The only reason more people aren’t doing this? It’s pretty simple. Either they don’t know about it, think it’s too risky or difficult to try, or are afraid of missing out on some big move up that may or may not happen.

That’s why we’ve been working with Amber to spread the word about this strategy. Not only is it easy, but the only real risk is that you miss out on some upside. But that’s why we like using this for big blue-chip companies like IBM… it works best for stocks that you think are unlikely to jump big anytime soon. And even if they do, you’re still getting paid to sell for a profit. I’ll take that trade any day.

Bottom line, don’t let the fact that we’re talking about options fool you… this is one of the easiest, most conservative methods of earning extra income around. In fact, selling covered calls is as close as you’ll get to a “win-win” in investing.

To find out more about this strategy and get our latest trades sent straight to your inbox, follow this link.