Earn Money in Spare Time
We like to earn money in spare time with our stock investments. Lately we’ve been using OXY for cash flow trades. We currently own 800 shares of OXY in this portfolio with a basis of $48.52 per share. We have an active trade with two put option contracts at the $42.50 strike price for the 8/15 expiration date. This post walks through some of those trades. Our covered calls have expired out of the money, so we keep that premium as passive income. Now the shares we hold are unencumbered, so we can sell more covered calls to create passive income.
Once we have a healthy allocation to a company we’ll sell cash secured put option contracts just below the money to create cash flow. Since we’ve already done our research on the company this process only takes a few minutes each week. That minimal time allocation makes this a great way to earn money in spare time. If that put option expires out of the money we can then sell another put option to create more cash flow. If the put option contract goes into the money we could take the shares. We could also roll the position to a different strike price that is further out in time. Our primary objective with selling to open the put option is to generate options premium as cash flow. That passive income will reduce our basis on the shares we already own.
We have 800 shares of OXY in this portfolio and our cost basis is $48.52 per share. We can sell a covered call option just above our basis and earn money in spare time. We’ll make money on the option premium when we sell to open the covered call. If OXY runs up and our shares are called away we’ll also make money on the sale of the shares as long as our strike price is above our cost basis. OXY also has a dividend of $0.24 coming up around 9/10. We’d like to collect the dividend, but it isn’t enough for us to stop trading the company until then.
On the price chart below we can see OXY is bumping into a resistance line at about $45.80. This is a one year chart with daily candles. Prior to the share price drop resulting from the Trump Tariffs in April we can see more lines of resistance. There’s a line around $48 and another at just under $50. Each of these resistance lines are likely to slow down the upward price movement. So we’d like to be above these resistance lines on our call options. That way the resistance lines can slow down an upward movement and we’re more likely to keep our shares.
We sold to open the $50 call option for the 8/15 expiration date to earn money in spare time. We brought in $0.62 per share on those covered calls, and we sold five contracts. That’s a total of $310. We also sold to open one contract of the $52.50 covered call for the 8/15 expiration date. That trade brought in $0.29 per share, or $29 for the trade. In total these trades gave us $339 in passive income on shares we already own. We went that far out because OXY is having earnings on 8/7. Here is where we find that information.
Selling the call option through the earnings date introduces volatility, which gives us more premium than normal. We’re only selling calls on a portion of our position. That way, if OXY runs up and we sell shares with our calls, we’ll still own some shares. We also spaced out our allocation over two different strike prices. There’s a chance OXY will trade above $50 between now and expiration, and it’s less likely to trade above $52.50. This way we’re capturing as much premium as we can while reducing the likelihood we have shares called away. If OXY runs up through both of these call strikes we can either let the shares go or roll the position to a higher strike price on a different expiration date.
Weekly Option Trade Recap
We sold to open five contracts of the $50 call strike for the 8/15 expiration date. We also sold to open one contract of the $52.50 strike for that same 8/15 expiration. Our portfolio also has two contracts of the $42.50 put for that same 8/15 expiration date. The covered calls are above the trading price while the put options are below the trading price. This way we’re able to earn money in spare time on both sides of the trading price. We’re ok with it if we need to buy more shares at $42.50. And we’re also happy to sell some of our shares at the $50 strike or the $52.50 strike. Doing so would reduce our cost basis per share even more. These trades bring our cost basis down to $48.10 per share.
