In our homepage video titled “Secure your future before breakfast” I talk about how my wife and I make more money before breakfast on a Monday then I ever did during my best week practicing dentistry. Anyone can do it and do so at an acceptably low level of risk.
First, you need an understanding of derivatives. If this is unfamiliar territory to you, you will need to give it some time to become comfortable with the concepts. The Wikipedia explanation is thorough. Chapter 8 of Monday Morning Millionaire gives a simplified version and focuses on calls and puts. Combinations of calls and puts using different strike prices, different settlement dates, different but related securities make an enormous number of strategies possible. Every one of them makes money for your broker. Some will give you spectacular gains in the short run. Over the long run, this is another reliable path to poverty. (See p. 65 of Monday Morning Millionaire.)
Learning how to use covered calls and cash-secured naked puts in a specific and controlled way will minimize your risk and give you excellent results. However, it is a speculative activity and does not belong in your core portfolio until you become very confident. Chapter 8 of Monday Morning Millionaire shows how.
Although tax-advantaged accounts like an Individual Retirement Account or 401(k) in the United States or in Canada, a Registered Retirement Savings Plan or a Tax-Free Savings Account have restrictions, covered calls are always allowed. Some, but not all, allow cash-secured uncovered puts which is the flipside on writing covered calls. Check with your broker. Outside your tax-advantaged accounts, anything goes.
Here is how to carry out this exercise.