How To Generate Income From Gold Stocks | The Mesh Report

How To Generate Income From Gold Stocks

The Gold Enthusiast June 29, 2022 Comments Off on How To Generate Income From Gold Stocks

With markets looking increasingly volatile, investors might be interested in looking at safe-haven investments. Safe haven investments are used by investors when they are concerned about economic or political risks in the market.

The most common safe-haven investments are gold and bonds. These assets have the potential to outperform stocks during equity bear markets, which could potentially be just around the corner.

Gold investing can be done on via the Spdr Gold Shares ETF (GLD), which aims to match the performance of the price of gold bullion.

This gold ETF has seen a return of +0.58% in the last 6 months, which is a lot better than most equities. Unfortunately for income investors, the GLD ETF does not pay a dividend.

Thankfully, as sophisticated investors, we can generate an income from holding GLD by using options. The strategy is a known as a covered call which involves selling call options against a stock position.

Let’s take a look at the Barchart Covered Call Screener for GLD:

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GLD Covered Call Example

Let’s evaluate the first GLD covered call example. Buying 100 shares of GLD would cost $16,962. The August 19, 188 strike call option was trading yesterday for around $0.44, generating $44 in premium per contract for covered call sellers.

Selling the call option generates an income of 0.26% in 51 days, equaling around 1.86% annualized. That assumes the stock stays exactly where it is. What if the stock rises above the strike price of 188?

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