Looking for Quick Income

One of the benefits of keeping at least some cash in my ROTH IRA is that I can buy an investment if the price looks attractive. Most of the time I am looking for long-term investments. There are weeks when there are no obvious buy opportunities. Rather than let my cash sit idle, earning essentially nothing, I look for some quick trades that can bring in at least $100. While $100 on an investment of $13,638.70 may seem like small change, the income from one week of $13,638.70 in a cash mutual fund is nothing.

The Game I Play

Cash income even if there are no dividends.

When the news looks positive for electric vehicles, I don’t generally think of Tesla as an investment. It is far too speculative. This would have been a good week to buy TSLA shares, as TSLA responds favorably to news that suggests that their area of expertise is gaining traction. Ford and GM are less volatile, and also have the ability to be major players. Ford’s and GM’s stock is less tied to a single type of vehicle. I still see gasoline-powered and hybrid vehicles as potential winners for the present. I see Ford and GM stock as far less risky for short-term and long-term investing.

Therefore, I bought 500 shares of Ford and 100 shares of GM. I then immediately sold covered calls on all of the shares. This gave me an immediate profit of $106.13 for about 15 minutes of work.

I started by buying shares of F and GM in my ROTH IRA.
Seconds later, I sold covered calls on all of the shares I purchased to gain $106.13 in immediate income.

What Happens Next Depends

Both contracts expire at the market close tomorrow. If the GM shares are trading above $60, my 100 shares will sell, and I will receive another $8 in profit – capital gains. I won’t pay taxes on the gain because the transactions are in my ROTH IRA. If the F shares are trading above $15.50, I will grab another $100 in capital gains. Therefore, my potential income from 3-4 days of investment patience could be over $200 tax free.

Working at the Home Depot? Nope!

If either or both don’t close above the contract price, it is likely another opportunity will open up next week to sell covered calls on the remaining shares. A few minutes of work each week can and does add up during the month. I remind myself that I worked 22 hours at the Home Depot to earn a ridiculously small return on my time investment. I received $9.50 per hour, and I enjoyed it. But I would rather earn $100 in fifteen minutes and spend the other 21.75 hours doing more important things with my time.

Twenty Two hours for less than $200. Fun, but not profitable.

Full Disclosure

Cindie and I own 5,080 shares of F. Most of these shares are a long-term investment. At the moment 1,500 shares could be called away due to covered call trading. I also own 200 shares of GM. All 200 could be called away tomorrow at market close.

For more covered call ideas: COVERED CALLS