Selling Cash-Secured Puts vs. Book Royalties: The Best Passive Income Strategy for the Average Person

It takes money to make money; this is usually the case. However, there are some things in life that we can create for free.

The goal of financial freedom is to collect as many income-producing assets as possible. Most of these assets require capital to obtain. Some income-producing assets are treasury bonds, dividend-paying stocks, rental properties, and coin-operated machines (ATMs, vending machines).

Becoming a writer is a way to generate income without having a bunch of capital. The only catch is that it may take two to three years to see a return on your time investment.

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Today, I want to compare two asset classes: options trading and book royalties. I will look from the perspective of a 40-year-old family person who may have little time to dedicate to their newfound income stream. Let’s begin.

Selling cash-secured puts for passive income. You will need a lot of capital to sell cash-secured puts for passive income. A cash-secured put is an option contract you sell to someone who wants insurance for their portfolio.

It is cash-secured because your brokerage requires you to hold the amount of money it would take to purchase 100 shares at the strike price.

For example, let’s say SoFi Technologies (SOFI) trades for $6.64. I want to sell a cash-secured put at the strike price of $5.50. I need $550 in cash in my brokerage account ($5.50 x 100).

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I would receive an $8 premium for this trade. Why would I do all of this for an $8 premium? This is why you must understand money before you trade options.

So, I would earn $8 over a $550 investment. The contract would last a month, and then I could do it again. I would earn $96 annually with the same $550 investment, which is an annual yield of 17.5%.

The going rate on high-yield savings accounts is 5%, and that is subject to decrease pretty soon. For the most part, you will earn 2-3% from a high-yield savings account.

You can earn 17% on your invested capital for a bit of work and a little risk. That’s not a bad haul.

If you increase your portfolio by ten, you would have an $80 premium over a $5,500 portfolio. The magic of options trading is adjusting your risk tolerance at each transaction or hedging your bets with another options trade.

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The goal of options trading is to earn a significant yield on your idle money. Yes, you can set your money in a high-yield savings account or money market fund, but you are 100% dependent on prevailing interest rates from the Federal Reserve.

Selling cash-secured puts and overall options trading allows you to take control of your financial destiny and set your risk preferences. 

Writing books for passive income. On the other end of the spectrum is becoming a writer. Writing is a very low-overhead business, but gaining traction requires a lot of time.

I started writing in June 2020. I opened a blog and began writing 1,000 words every day. I enjoy the process of writing, as it’s the most challenging thing I do daily.

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In January 2021, I released my first book on Amazon. It was a short collection of ten of my blog posts. I now release a book every day on Amazon.

What are my financial numbers after four years of writing? Last month, I made $202 on Amazon, $63 on Draft2Digital, $18 on Medium, and $8 from my blog, for a total of $291.

$291 doesn’t seem like a lot of money, but you have to consider the return on investment. I write, edit, and publish my own books and create my own book covers. I do everything myself.

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I have annual memberships to Pixlr, Grammarly, WordPress, and Canva—that’s it. Plus, I can write off these expenses for my business.

The bottom line is that I have no risk. You could say I may have “opportunity costs,” but I love what I do. I love writing about challenging subjects like financial freedom and generational wealth.

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A parent with limited time. I never expected to become a full-time writer because I retired from the Marine Corps. I am already financially independent.

If you have limited time, you must choose the path that fits your schedule. You don’t need to write daily or release a book at all. You don’t even have to write 1,000-word articles.

Selling cash-secured puts doesn’t take much time at all, especially once you have a handle on the ebb and flow of a particular stock.

I can set up a cash-secured put in five minutes, which will last me a month. I will check in on it once a day, along with the rest of my investment portfolio.

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Therefore, time isn’t truly an issue with either income stream. However, if you need income now, selling cash-secured puts will generate that for you.

Writing is the long game. You want to invest at least five years before you expect serious results. You are building an audience and carving out a niche.

You can’t truly build an audience until you have a specific niche. So, you must figure those two things out simultaneously until they unite. Then, the magic happens.

If you have $5,000 lying around, you can try your hand at selling cash-secured puts. Be warned that options trading is an entirely new language.

Nobody will be there to hold your hand. Read as many options books as possible, but they won’t give you the physical steps to take on your platform. Every platform is different, and it’s something you must learn on your own.

Consulting in the Metaverse

Combining both ideas. If you really want to be cheeky, you can write about your options trading career. Trust me; people love the idea of trading options at home.

Few things in life can generate returns better than options trading. Anyone can trade options from the comfort of their home. So, why don’t many people trade on the options market?

Options trading is an emotional roller coaster. You determine your risk, execute a trade, and worry about it until the transaction finishes. Most people can’t handle this type of stress.

You can write about your journey and how selling cash-secured puts fits into your overall lifestyle. Options trading is a journey that many people want to understand and learn.

Conclusion. Most people don’t like writing but dream of being an options trader. However, they should become writers.

What’s Your Budget for Speculation

Becoming a writer carries minimal risk, and you can eventually generate significant returns. Selling cash-secured puts is relatively safe; however, you must understand the game.

The risk of selling cash-secured puts comes from making poor “strike price” choices or choosing a volatile stock. 

Selling cash-secured puts takes finesse and a calm demeanor. You can’t go for the biggest wins. You must also read about the capital markets (options, bonds, stocks, real estate, cryptocurrencies).

To sell cash-secured puts, you also need to do the math. You need to understand your annual yield when you sell a put. There is definitely a lot going on.

I recommend that most people become writers before entering the options market. I do both and love both.

However, if you become a decent writer, you will eventually generate true passive income without taking daily risks—that’s the future I want. Good Luck!

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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it.  I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing