ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

How to make passive money while waiting to buy REITs at low price?

Updated on May 31, 2013
Passive money
Passive money | Source

Do you trade REITs and options?

See results

Making passive money while waiting to buy REIT at low cost:


"Investing isn't risky; not being in control is risky."

Quote by famous financial teacher, Robert Kiyosaki.


Before I start this advanced topic, I would recommend readers to read How to generate passive money from dividend yielding REITs. to understand what are common REITs and how their dividend income can help them.


Now, in this article, I am focusing on how to buy REITs cheaply and getting handsome passive money while waiting. Good dividend yielding REITs tend to have option chains. These option chains are a combination of puts and call options spread over various months and years.


There are risks associated with option trading and readers are required to read and understand the risks before doing option trades. It is advisable to do paper trading or virtual trading under a financial expert to improve your financial skills before putting any real money.


Put option is basically a contract between two individuals to exchange an asset at particular price and date. Selling put option basically means that you have the obligation to buy the asset if buyer uses the option.


Here, is an example of dividend yielding REIT, AGNC which you want to purchase at cheaper price:

Put option with different Strike Price for AGNC
Put option with different Strike Price for AGNC

To keep it simple and easy to understand:


Last sale price of AGNC in this picture is 28.97. There are various put options available with different strike prices like 25, 26, 27 and 28. If we want to buy this REIT at price of 28, quantity =100, we can simply sell off the put option with strike price of 28. We get 85 dollars immediately in our account and if the REIT price falls to 28, we get the REIT. Otherwise, we get 85 dollars and the put option expires worthless. The only downside is that if the REIT price falls down very, very low like 5, we still need to buy it at the price of 28. The risk is unlimited in that case and that is why it is called risky product. However, to keep it simple, the risk is similar to the stocks that we purchase without any insurance.


In summary, when we want to buy a good quality REIT at low price, the strategy of selling put option helps to get some handsome money while waiting for the transaction to take place at our selected price. However, there is no guarantee of the transaction and again, the risk can be unlimited if we do investment without proper understanding. The best suggestion is to do paper trading or virtual trading where no money is involved. You need to practice your investment skills until you become proficient and you can handle real money with ease and no emotional attachment. Good investment training and continuous practice is recommended before trying any of the above strategy.

4 out of 5 stars from 1 rating of REITs as passive investment

Disclosure: While writing, I am long in AGNC and I do option trading.

working

This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://corp.maven.io/privacy-policy

Show Details
Necessary
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
Features
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Marketing
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Statistics
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
ClickscoThis is a data management platform studying reader behavior (Privacy Policy)