It’s an amazing feeling to know I can make money anytime I want.

It’s not that I have some super-rare skills, although ring announcing is harder than it looks. (I’m a boxing ring announcer in my spare time. Seriously.)

But with a few mouse clicks, I can get several hundred to several thousand dollars deposited into my brokerage account.

Currently, the majority of my portfolio is invested in Perpetual Dividend Raisers – stocks that raise their dividend every year. And I reinvest all of my dividends. So my portfolio doesn’t generate any income, as those reinvested dividends are building wealth.

But if I want some extra cash – maybe to pay for a vacation, Broadway show tickets or a costly car repair – it’s easy to get, and I can get it in a low-risk way.

I sell options.

Now, I’m not selling something I’ve already bought and taking a capital gain. I’m selling something I don’t own. I’ll explain.

Selling Covered Calls

A call is an option that gives the buyer the right to buy a stock by a certain date at a specific price.

Let’s say you own shares of Cisco Systems (Nasdaq: CSCO) and the stock is trading at $38. You could sell a call with an expiration date in June and a strike price of $39 for $1.55.

That means you are selling the right for the buyer of the call to buy your shares of Cisco for $39 anytime between now and the third Friday in June. (Options expire on the third Friday of the month.) As a result, you will receive $1.55 per share, or $155 for every 100 shares. (Options contracts are made up of 100-share blocks.)

If the stock does not reach $39, your buyer will not buy your stock and you keep the $155. If the stock is above $39, the buyer will buy your stock by expiration. You can always buy back the call before the buyer acquires your stock, if you don’t want to part with your shares.

This strategy generates income and gives you some downside protection. If the stock falls to $36.45, you’re still at breakeven because you’ve collected $1.55 per share, offering you protection of up to 14% slide in the stock.