If you are a professional working for a Fortune 500 company, I assume you make a good living, and that your company provides you with an ESPP, or Employee Stock Purchase Plan. This is a valuable tool that many employees do not know about.
On average, ESPPs provide employees with a 10-15% discount on publicly traded stock. We don’t get many legs-up in life, and especially in the stock market with real money. When we find money for free, we should take it.
First things first, get your company match in your 401k. then, look into the possibility of a paycheck deduction into the ESPP. Call your benefits people to ask about this, or look around on your company’s benefits website.
If this expands your investments, or even introduces you into owning stocks, then I’m very happy we got you to this point! If you want to grow that money faster and take the next step, then continue to read my comments about selling option calls on those 100 shares of stock in order to make passive income and sell that stock in order to roll it back into the ESPP. If you do not max out your yearly ESPP, which is commonly between $10,000 and $25,000, then I believe you are leaving free money on the table.
Let’s say your company’s stock is $80. You work your way up to owning 100 shares. With that $8,000, you sell a 60 day $85 call option and make an extra $200. That’s an extra 2.5% on your money, and it also obligates you to sell the shares if the stock is at the strike price at contract expiration. I believe this is better than setting up a limit order and trading at market prices. It lets us unsophisticated investors gain a small edge of leverage.
I love to try to max my yearly benefit through my ESPP. My second goal is to diversity into other good companies. I want to use this filtered money in order to do this. I’m using free, discounted, leveraged money to save and invest in my retirement. I am all about buy & hold in my IRA; hopefully when I’m it will be a healthy nest egg.
I am promoting this information to educate and enlighten my audience. I am not selling anything. Let me know if you have any questions and I’d be happy to help!
The Option to Sell 