# Generating weekly income



## runner39 (Mar 11, 2010)

I have about $90,000 and need to produce around $300-400 of weekly income through investments, any ideas to how I could achieve this. 

Thanks


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## FrugalTrader (Oct 13, 2008)

On an annual basis, you are looking for a 21% yield. It will be very challenging to meet that requirement with the capital that you have.


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## the-royal-mail (Dec 11, 2009)

What about an annuity?

http://www.theglobeandmail.com/glob...er-4-what-does-an-annuity-cost/article731396/


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## FrugalTrader (Oct 13, 2008)

Note that he's looking for $400 *weekly*.


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## the-royal-mail (Dec 11, 2009)

I know. There just isn't a lot of money to play with. OP should either lower expectations or inject more capital.


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## Four Pillars (Apr 5, 2009)

the-royal-mail said:


> I know. There just isn't a lot of money to play with. OP should either lower expectations or inject more capital.


or get a part-time job.


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## runner39 (Mar 11, 2010)

realize w/ $90k it is virtual impossible, if I was able to get the capital to $200k would it be more realistic?


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## MoneyGal (Apr 24, 2009)

That linked article is surprisingly unhelpful, because it does not tell you the age at which the sample annuities are purchased. I can tell you that the figures (almost certainly) are for a 65-year-old male in good health, but it would be nice if the article did, too. And it would probably be useful to note that the age at which you purchase an annuity dramatically affects the payout rate/cost. 

Back to the weekly income discussion...


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## HaroldCrump (Jun 10, 2009)

$400 a week is over $20,000 a year in income.
If $90K could produce that much income without significant risk of capital loss, everyone would be doing it.
Folks with over $100K to invest this way would simply quit their jobs and live off the $25K a year that would have produced.
I honestly think you should lower your expectations of income to something more reasonable that can be obtained in the capital markets today without risking severe loss.
To make up the difference, I suggest taking up a part-time job, advancement at current job, switching careers, etc.
If your goal is to have more disposable income, please evaluate your expenses and consider saving more money.


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## andrewf (Mar 1, 2010)

Maybe some more background. Age? How long do you need the income stream? Does it need to increase with inflation?

With GICs, you're looking at $500k to $1 million to generate that income at current rates. And that's before tax!


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## FrugalTrader (Oct 13, 2008)

That is a good point, if you are 65 and little or no other income, you could be eligible for GIS in addition to the typical OAS.

On another note, if you could increase your capital base to $200k, you could probably comfortably pull 4% out of an income portfolio (dividends etc), which would give you $8000 per year (or $167 per week).


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## runner39 (Mar 11, 2010)

so I increase capital to $200k and over the next 10 years would 7% growth (including dividends and investment growth) be attainable, I think it could be and probably closer to 9% with the right investments, I agree somewhat risky but could it be done?


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## kewlthing (Jan 30, 2010)

Let's say someone has around $300,000 of pretty liquid funds. Let's also say the person is aorund 50 years old with a part time job, and needs that income until they can collect Canada Pension. Can that figure of around $300 - $400 a week be achieved? If so, how would it be done?


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## FrugalTrader (Oct 13, 2008)

As MoneyGal mentioned in another thread, you cannot bank on 9% constant return. What are you going to do during negative years (ie. 2008)? If you need income, then it's probably best to focus on the income streams and consider growth a bonus.

As to the other question, $300k @ 4% distribution is $1k/month. You can probably increase your monthly distribution by dipping into your capital, really depends on your goals. For me, i'm the type to spend the distribution, but protect the capital.


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## runner39 (Mar 11, 2010)

FrugalTrader said:


> As MoneyGal mentioned in another thread, you cannot bank on 9% constant return. What are you going to do during negative years (ie. 2008)? If you need income, then it's probably best to focus on the income streams and consider growth a bonus.



The 9% return i was referring to was dividend (4-5%) and growth (4%) together, I see this as quite attainable, no?

I realize growth is impossible to forecast but aside from another 2008 a 4% growth is quite minimal. My goal would be to retain the capital as much as possible.


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## andrewf (Mar 1, 2010)

runner39 said:


> The 9% return i was referring to was dividend (4-5%) and growth (4%) together, I see this as quite attainable, no?
> 
> I realize growth is impossible to forecast but aside from another 2008 a 4% growth is quite minimal. My goal would be to retain the capital as much as possible.


You can't just ignore years that are inconvenient because they had -30% returns. A more reasonable expectation for equity returns is in the 6-7% range. You really shouldn't count on more.


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## the-royal-mail (Dec 11, 2009)

Seems to me there should be a professional you can speak to about crunching the numbers for you. Maybe your accountant or someone at the bank that can put the numbers into a spreadsheet? Or maybe even google annuity calculation spreadsheet or similar. I doubt that the specific answers you want could be realistically delivered to you via a discussion forum. What you want I think qualifies as a billable service. Someone please correct me if I'm wrong.


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## MoneyGal (Apr 24, 2009)

Nah. This is a calculator question, not worth billable time. 

If you *require* the income and cannot tolerate fluctuations, then the short answer is there is no financial product which will provide a guaranteed annualized 9% return through whatever combination of growth and dividends. If there was, wouldn't we all be invested in it?


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## OhGreatGuru (May 24, 2009)

runner39 said:


> I have about $90,000 and need to produce around $300-400 of weekly income through investments, any ideas to how I could achieve this.
> 
> Thanks


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## slacker (Mar 8, 2010)

runner39 said:


> I have about $90,000 and need to produce around $300-400 of weekly income through investments, any ideas to how I could achieve this.
> 
> Thanks


No. Well ... consider going to 'rama, or going "all-in" on Lotto 649.


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## Cal (Jun 17, 2009)

runner39 said:


> The 9% return i was referring to was dividend (4-5%) and growth (4%) together, I see this as quite attainable, no?
> 
> I realize growth is impossible to forecast but aside from another 2008 a 4% growth is quite minimal. My goal would be to retain the capital as much as possible.



If you are looking for weekly income...to be simplistic, you would have to ignore the growth portion, unless you are referring to growing more via dividend reinvestment plan. As to tap some of the growth, you would have to sell, which would leave you with less shares to get dividends from. Also, you may have some income tax payable depending upon your other investments and/or business situations. 

My guess for a safe, balanced, realistic return would be around 5%. You could buy 90K worth of preferred shares to give you a relatively safe 5-6% return.

I would lean towards dividends myself, as with dividend increases you could at least get a raise for yourself every year or so. Although there is another edge to that sword...see MFC.

If you want $300 a week x 52 = $15,600 per annum, I would aim for 300K to have saved minimum for that type of cash flow.

More background info would help. Age, pension...


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## kcowan (Jul 1, 2010)

John Bogle says you should count on 7% return in the long term. And that is equity. There will be down years and he said that 2 years ago!


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## osc (Oct 17, 2009)

As you need a constant amount of income, you only need higher than normal returns for a couple of years (in which you probably will have to not use the gains). 
You could do it with derivatives and a bit of luck (not a 2008-like event in the first few years). Unfortunately if you don't have experience with derivatives, I won't advise trying it.


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## warp (Sep 4, 2010)

NOTICE:

If anyone on this board can generate $ 400 WEEKLY , with a $90 K portfolio....

PLEASE call me , and I will pay you to handle all my accounts as well! PLEASE!



Only way to do close to that now is by taking huge, huge, risks.

There are several vehicles that pay close to 20%.......but would you put every penny you had into them???


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## dogcom (May 23, 2009)

Warp your lucky you are not on the Canadian Business Forum. You would probably get 20 replies from people who could do far better then $400 WEEKLY, with a $90 K portfolio.


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## Jungle (Feb 17, 2010)

I'm assuming that's coming from a business income, not really traditional investments like stocks/real estate.


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## warp (Sep 4, 2010)

I am not familiar with the Canadian Business Forum

I assumed we were talking about investment income.

If you are talking about investing the $90 K in a business venture, that presents new problems.

1) that is risky as well, and beware the person who tells you he has a great business for you if youd only give him your $90 K to work with.

2) and far more important to me......
that would mean that I would have to actually WORK!!


Its been a long, long time since I did that, and I'd prefer not to go back!


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## HaroldCrump (Jun 10, 2009)

warp said:


> I am not familiar with the Canadian Business Forum
> 
> I assumed we were talking about investment income.


No, DG's comment was in sarcasm at the volume of spam on the CBO forum.
Ads for land banking, MLM, cheap foreign goods, etc. galore over there.
You are not missing anything by not being on that forum 
I go there maybe once a month these days.


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## runner39 (Mar 11, 2010)

Thanks for the replies, realize it was just a pipe dream anyways!


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## osc (Oct 17, 2009)

warp said:


> Only way to do close to that now is by taking huge, huge, risks.


Not true. If the market will continue to be bullish or neutral, is very easy to get $400/week from $90k with less risk than holding an index. Just sell ATM naked puts with the next expiration date (or covered calls inside an RRSP). If you do that with weekly IWM, the income will be about $1000/week (the time value of 12 units). Of course you'll lose capital when market drops, but in a bullish market you'll make more than $400 on average per week. If the market drops, the loss is lower than holding the index, so the risk is lower. 
Also, there are other option strategies slightly more complicated, with even better risk/reward profiles than this (like certain calendar spreads).


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## HaroldCrump (Jun 10, 2009)

osc said:


> or covered calls inside an RRSP


Is it possible to do covered calls inside an RRSP account?
I recall asking my brokerage a while ago and they said you need a margin account for doing options of any kind and RRSP a/c is not eligible for margin.
Are you certain about this?


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## runner39 (Mar 11, 2010)

osc said:


> Not true. If the market will continue to be bullish or neutral, is very easy to get $400/week from $90k with less risk than holding an index. Just sell ATM naked puts with the next expiration date (or covered calls inside an RRSP). If you do that with weekly IWM, the income will be about $1000/week (the time value of 12 units). Of course you'll lose capital when market drops, but in a bullish market you'll make more than $400 on average per week. If the market drops, the loss is lower than holding the index, so the risk is lower.
> Also, there are other option strategies slightly more complicated, with even better risk/reward profiles than this (like certain calendar spreads).


could you explain this further, what is ATM and IWM?


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## MoneyGal (Apr 24, 2009)

HaroldCrump said:


> Is it possible to do covered calls inside an RRSP account?
> I recall asking my brokerage a while ago and they said you need a margin account for doing options of any kind and RRSP a/c is not eligible for margin.
> Are you certain about this?


I don't know when "a while ago" is but the Income Tax Act was amended in 2005 to allow for covered calls in an RRSP. No puts in an RRSP, and no naked calls.


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## humble_pie (Jun 7, 2009)

in practical terms whether it's possible depends on the broker, even though it's allowed by the minister of finance. It is possible at my broker.

the way around this - at any broker - is to hold stock long in the rrsp & sell & trade its options in the margin account. I say this because i know how to almost never be assigned. In a thousand trades, perhaps 1 or 2 assignments.

in an exceptionally dire case of call option assignment in margin account, brokers usually permit swaps into & out of an rrsp, so it would be possible to swap the stock out of rrsp & into margin for delivery on the assignment.

in general, it's far more efficient to trade options related to rrsp long stock in the margin account. This is because rrsps have so many restrictions on option trading. Brokers never permit more than level 2 trades in rrsp, but i'm a level 5, so i benefit from this flexibility in the margin account.

the catch is that the margin account must be able to support what the computer believes is a naked short call position, although in reality it's fully covered. A related catch is that the investor needs to be level 4 or level 5 to do a naked call. Or else have a serious talk with his broker.


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## osc (Oct 17, 2009)

runner39 said:


> could you explain this further, what is ATM and IWM?


ATM - at the money (the option with the strike near the underlying price)
IWM - iShares Russell 2000 Index (more volatile and higher returns than SP500)


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## osc (Oct 17, 2009)

HaroldCrump said:


> Is it possible to do covered calls inside an RRSP account?


I'm selling covered calls in my Questrade RRSP account. The commission is $10 + $1*nbr of contracts.


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## HaroldCrump (Jun 10, 2009)

osc said:


> I'm selling covered calls in my QuestTrade RRSP account. The commission is $10 + $1*nbr of contracts.


OK, thanks guys, time to dial customer service


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## humble_pie (Jun 7, 2009)

calling customer service ... not sure about that ... brokerages tend to be exceedingly sticky about their option policies & probably won't change on the basis of a few customers' requests.

if they turn you down, apart from changing brokers you can certainly sell the calls in the margin account, where they will be short & uncovered, ie naked. They will be, as the philosopher Hobbes once famously remarked about life, nasty, brutish & short.

but in reality they will be covered by long stock in the rrsp, which in a dire assignment case can be swapped out. The swap mechanism does not count as an rrsp withdrawal. Brokers usually charge a fee for a swap. About $45.00.


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## andrewf (Mar 1, 2010)

Any insight at to why covered puts are not allowed to be written in a registered account? Writing covered puts (covered with cash enough to purchase at the strike price) is no riskier than covered calls. I'm guessing the idea with prohibiting naked calls and puts is to prevent balances going into the negative.


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## MoneyGal (Apr 24, 2009)

My info is from Gordon Pape, who says he has contacted CRA several times over the years to ask about puts in RRSPs, and has always been told puts (of any kind) are not allowed, with no distinction between naked and covered puts. I don't have any more info than that.


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## HaroldCrump (Jun 10, 2009)

I believe the original idea was around leverage - the govt. didn't want to allow leveraged investing for RRSP.
Thus, the financial institutions implemented that idea by disallowing RRSP a/c to be marginable accounts.
Of course, folks borrow to invest into RRSPs all the time and there's nothing they can do about that.
I agree that all types of covered positions should be allowed.


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## furgy (Apr 20, 2009)

runner39 said:


> I have about $90,000 and need to produce around $300-400 of weekly income through investments, any ideas to how I could achieve this.
> 
> Thanks


$90,000 invested in TR.UN will get you $300 a week in distributions at current share price.

Assuming they don't cut distributions , they have a lot of debt and may be a little risky , but chasing that kind of return will always present some major risk.

I bought at $2.50 and am enjoying my 17% or so income.


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## warp (Sep 4, 2010)

One rule of investing:

To the poster who started this thread:

If you dont understand it...dont do it.

That relates to calls, puts, options, ATM, etc, etc.

Watch out as these strategies will work when the market goes in the direction you THINK it will go......and who knows that exactly?

Now, buying IWM.....the Ishares Russel2000 index, which is a US small cap ETF, may actually be a solid long term play,,,although I'd rather buy VBR...Vanguard small cap Value ETF.

Secondly...buying TR.UN might be a good investment or a bad one , ( the high yield and debt gives you a clue as to the risks).....but who would recommend to this gentleman that putting ALL $90 K in one reit is a good idea?


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## cardhu (May 26, 2009)

MoneyGal said:


> I don't know when "a while ago" is but the Income Tax Act was amended in 2005 to allow for covered calls in an RRSP. No puts in an RRSP, and no naked call


Covered calls were allowed in RRSPs long before 2005, and yes puts are allowed in an RRSP … you can’t write ’em, but you can certainly own them … the Income Tax Act was amended in 2005 to allow for puts. 



andrewf said:


> Any insight at to why covered puts are not allowed to be written in a registered account? Writing covered puts (covered with cash enough to purchase at the strike price) is no riskier than covered calls. I'm guessing the idea with prohibiting naked calls and puts is to prevent balances going into the negative.


You can’t write a covered put in an RRSP because in order to do so, you’d have to short the underlying shares, and you can’t sell short in a registered account. What you are describing is not a covered put, but a cash-secured naked put.

A covered put is riskier than a covered call, just as shorting a stock is riskier than owning the stock long.


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## MoneyGal (Apr 24, 2009)

I would be interested in seeing a source for that. Here's my Gordon Pape reference (it is a Q&A from his 2000 WealthBuilder newsletter): 

*PUT OPTIONS IN AN RRSP*

Q: You note in your 2000 Buyer's Guide to RRSPs that in an RRSP you can hold call options on qualifying underlying instruments and write covered calls on same, and that you cannot hold puts, but what you do not address is whether you can write puts -- suitably covered by cash or maybe T-Bills. I suspect that they are not allowed, but I've seen no one specifically address the point. I don't find bulletin IT320R2 very helpful on the matter either:

_14. In accordance with paragraph 4900(1)(e) of the Regulations, a warrant or right listed on a prescribed stock exchange in Canada or after February 24, 1985, on the Toronto Futures Exchange, giving its owner the right to acquire property, is a qualified investment at the time of its acquisition if, at that time, the property which would be acquired by exercising the warrant or right would be a qualified investment for an RRSP. For example, an RRSP which purchases a call option listed on the Vancouver Stock Exchange has acquired a qualified investment if the option may be exercised to acquire a share described in subparagraph 204(e)(iv). An RRSP which purchases a put option has acquired a non-qualified investment._

It seems to me that this should fall under spirit of the legislation -- a derivative instrument that lets you acquire a qualifying instrument -- but I suppose it might fail on the basis that you have only a contingent right to do so, based on someone else's absolute right to exercise the put. 

Did you ever press the tax department on writing puts? Did you ever get any further with them on the issue of holding puts in an RRSP? Is there a petition I can sign? - L.R. 

A: While I never specifically asked Canada Customs and Revenue to issue a formal ruling about writing puts, I did ask for such a ruling about buying puts for an RRSP and the answer was a firm "no". This is consistent with every other answer I have received from them regarding puts in an RRSP. Therefore, it would be my conclusion that writing puts is also prohibited. - G.P.


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## MoneyGal (Apr 24, 2009)

OK, then I went and read IT-320R3, _Qualified Investments -- Trusts Governed by Registered Retirement Savings Plans, Registered Education Savings Plans and Registered Retirement Income Funds_. Here's the relevant paragraphs:

*Warrants, rights and options*

¶ 21. A warrant or right is a qualified investment for a plan trust if it gives its owner the right to acquire, either immediately or in the future, property that is a qualified investment.

¶ 22. A call option is an agreement under which the writer agrees to sell a property at an agreed upon price, should the holder of the option elect to purchase the property. A put option is an agreement under which the writer agrees to purchase a property at an agreed upon price should the holder of the option elect to sell the property. Where a plan trust purchases a call option that, if exercised will result in the acquisition of a qualified investment, such option is a warrant or right as contemplated in ¶ 21. Where a plan trust purchases a put option, this results in the acquisition of a property which is not a qualified investment since the right the plan trust acquires is one to dispose of property. Where a plan trust sells (writes) a call option or a put option, there is merely an obligation on the plan trust to sell or buy the property at the agreed upon price should the holder of the call or put option so require. As no property has been acquired by the plan trust, the issue of whether such an option is a qualified investment is not relevant.

¶ 23. The writing of a naked call option, whereby a plan trust sells a call option in respect of an underlying property which it does not own, may result in the plan trust being considered to be carrying on a business. The same result may arise where a plan trust engages in a short sale, i.e., the plan trust sells property that it does not own. An RESP that is carrying on a business is revocable. An RRSP or a RRIF will be liable for income tax on its taxable income for any year in which it is carrying on a business.

/end quote

My reading of these paras (the entire section on puts in registered plans) suggests:

1. You cannot purchase a put option in an RRSP 
2. You can write a put option in an RRSP
3. If you write a naked put option, (all?) income in your RRSP may be taxable for that year

...all of which is consistent with what cardhu wrote earlier. You learn something new every day.


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## humble_pie (Jun 7, 2009)

good grief MG. 

no. 1 is wrong. Of course you can purchase a put option in rrsp - if your particular broker will allow it. Some brokers will not, but that is their individual policy as a brokerage house. The purpose of this strategy is to hold puts as insurance against market downturns.

there will be restrictions on exercising such puts, however, because if investor does not not already hold the stock, he would become short the stock through the put exercise; and no broker will allow this in rrsp. Generally, the exercise of options is never done online, but has to be carried out by registered representatives. Reps at the handful of brokerages that allow rrsp put purchases in the first place will refuse any attempt to exercise puts that would result in short positions. In the remote chance there would be human failure at this level, trading control will definitely reject such an order.

no. 2 is wrong. You cannot write (sell) puts in rrsp unless they are the puts that investor has already bought.

no. 3 is completely irrelevant, because no broker will accept orders for execution that will forfeit or impair the rrsp nature of the trust.


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## MoneyGal (Apr 24, 2009)

Can you tell I have never contemplated options inside a registered plan? 

I can also see that (at 5 a.m.) I mis-wrote number one - I meant to write, you CAN purchase a put option in a registered plan. 

As for my other two points, I am just going to slowly back away now...


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## andrewf (Mar 1, 2010)

Sorry, cardhu. I think of cash-secured naked puts as 'covered', because the cash is what you deliver if the option is exercised. I can see why true 'covered puts' are disallowed because they involve shorting shares.


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## HaroldCrump (Jun 10, 2009)

I just got off the phone with iTrade and following is what they told me:
- All registered accounts (RRSP, TFSA, RESP, etc.) are eligible for selling covered calls, subject to application approval.
- Puts are more restricted. Sales of naked puts (rather, cash-secured put sales) are not allowed.
- You can purchase and re-sell both put and call options inside the RRSP, however, executing the option requires manual intervention.

I got the sense that the higher you go up the complexity chain, the more problematic it will get.
So for now I am going to send in an application for enabling covered call writing inside my RRSP.


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## humble_pie (Jun 7, 2009)

yes indeedy. This is the maximum any broker will ever allow in an rrsp. Level 2 trading. I'm not surprised iTrade is cool with this, although i'd expect that some other online brokers are not.

more complex strategies can be built upon rrsp long stock, but they have to be done in a margin account.


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## qmanrei (Oct 4, 2010)

Very interesting topic, and although my response belongs in the Real Estate area of the forums it might allow for at least close to that return. 

There is also a high level of risk involved. If you have a mortgage broker you trust, second mortgages have a return of 10-14% after fees. But you still have to do a lot of due diligence on the property and the owner and still maintain a combined LTV of 80%. Higher the interest rate= higher the risk on the second. You also feel like you are in more control of your investments.

Two good books to help would be "Private Mortgage Wealth" and "The RRSP Secret". 

On $100,[email protected]% this is $12,000 = $230/week

Take Care


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## marina628 (Dec 14, 2010)

runner39 said:


> I have about $90,000 and need to produce around $300-400 of weekly income through investments, any ideas to how I could achieve this.
> 
> Thanks


Real Estate may do it for you .


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