Investing For Extra Cash Flow
One reason of getting into the stock market would be to gain some extra cash flow. There are basically 5 ways to get consistent cash flow from the stock market.
1. Dividends
Investing into great dividend paying stocks allows an investor to make some cash flow without having to actively manage their account. When you buy a dividend stock you are recieving your share of the companies profits. All you have to do is to hold onto the stock and you continue to get paid.
2. Covered Calls
Covered call writing allows investors to make money from their stock. Basically when you write a covered call you sell someone else the right to buy a stock that you already own at a given price. By selling covered calls on your stock every month you can make a little extra cash flow from the market.
You may be forced to sell the stock at some point in the future, but it can still be a pretty powerful way to make some cash flow.
3. Option Selling
There are a few different types of spreads which allow investors to profit in certain creative ways. For instance the Iron condor allows a trader to make money as long as the stock stays between a certain area. Taking advantage of those strategies can lead to a relatively consistent income.
4. Option Buying
Buying option contracts also allows a trader to make a much higher return in the stock market. The goal of buying options is to buy options and sell them at a much higher price in the future. This comes with a gigantic profit potential, sometimes getting a return of several hundreds of percentage points in a short period of time is not out of the question. But it also has the ability to lose you a lot of money as well, so finding a healthy mix is probably the best solution.
5. Day trading
Day trading and swing trading both attempt to make money in short term movements in the market. Over time compound interest sets in, so small gains made regularly can amount to a much higher return then larger gains made over a long time period. However it can take some time to get the hang of.