It was a nice sunny day here in quarantine in western New York, so I put on my flip flops, tried to find some shade, and brought my trusty laptop out to the deck today. One of the things I did while I was out there was record a few minutes of my screen as I made my newest “high-yield trade” with a favorite dividend grower, United Parcel Service (UPS).

Wait – is that a click-bait headline I used in the video below? “$580 cash in 3 minutes?” Maybe! But it’s also true… that’s the amount of income this trade generated (even though I won’t see it for a while because these trades are made in my retirement account!)

The truth is, these high-yield trades are designed to generate big, immediate income… and that’s exactly what this one with UPS did.

One of the neat things about these trades is that you can generate income whether the underlying stock goes up, sideways or even down a little. And my experience with UPS over the past year or so is the perfect example. As you can see in the chart below, since purchasing shares in April 2019, the stock has pretty much gone nowhere.

But during that period I was able to make several high-yield trades that generated roughly $2,000 in call income:

Call Option Income
$322 (100 @ $3.22) – April 2019
$350 (100 @ $3.50) – July 2019
$364 (100 @ $3.60) – October 2019
$390 (100 @ $3.90) – January 2020
$580 (100 @ $5.80) – July 2020 (today’s trade!)
TOTAL: $2,002

Considering my initial outlay of $11,362 — when I bought 100 shares at $113.62 — the call income alone has now generated a 17.7% realized return in cash. Throw in the 3%-plus dividend yield, and that puts the total income at 20%-plus… from a stock that has traded flat.

It’s not for everyone, but the high-yield strategy I used for these UPS trades helps me generate tens of thousands of dollars a year in what I call semi-passive income.

I also can’t really call it “passive” income because it does take me a few minutes to actually make the trade. And then typically a couple months after making the trade I need to check up on it to see how it did. But it’s pretty dang close to being passive!

I’ve been making income trades like this — and making them public — since 2014. You can check out every single trade I’ve made public over at TradesOfTheDay.com.

To be honest, while I like collecting the above average income from these trades, I’m more of a long-term, buy-and-hold investor of high-quality dividend growth stocks than a trader of them.

That’s why, overall, I only allocate about 20% of my investment funds to these kinds of income trades. The majority of my investment funds are in dividend growth stocks and municipal bond funds.

I’ll tell you more about those in the future.

Thanks and talk soon!
Greg

P.S. I only make these trades if: 1) I want to own the underlying stock anyways 2) I believe it is trading at a reasonable price 3) I’m comfortable owning it for the long-haul in case the price drops significantly below my cost basis by expiration and 4) I’m comfortable letting it go if shares get called away. To be mindful of position sizing, except in rare cases, the value of this trade wouldn’t exceed 5% of my total portfolio value. In addition, to minimize taxes and tax paperwork, I only make these trades in a tax-advantaged account, such as my Roth IRA or 401(k).