Launching Semi-Passive Income Portfolio for my Mom

Updated: 6 March, 2020 seen 112

For the last 3 years, I've been actively building my own,  my kid's and just recently I started my partner's fund, now there is one more people I care whose financial situation should be taken care of - my mom.

She just turned 60, there are still 5 years until her retirement age. It's neither much nor little. 5 years is a timeframe I'm looking to build a semi-sustainable "pension fund" to generate income in the level of average pension in Latvia (EUR 336 in 2020). I believe the average pension in 5 years from now (in 2025) should be around EUR 430 - EUR 500 per month.

I doubt we could get there using only income from dividends (even in the case with high yielding stocks at around 10% per annum it would ask to have a portfolio of about 50,000 EUR  - not that it's impossible in 5 years, but as I'm building several other portfolios for me this would be just too much to take.

That's why I've decided to use options or more precisely sell options on dividend stocks to boost income, the so-called wheel-strategy. 

For my mom's portfolio, I decided to start with writing puts on Wells Fargo (WFC). And more precisely 60-70 DTE puts.

As an account holder at Wells Fargo bank - I feel Okay selling options or owning shares of WFC

How To Open A Bank Account in U.S., As A Non-resident Non - citizen, Wells Fargo Bank

Wells Fargo stock history

Wells Fargo stock price as of March 6, 2020

Now, at the start of the March with markets tanked well bellow it's 52 weeks high I was able to write the following put:

Sold 1 WFC May 17'20 strike 30 @1.13

Literally this means that I got $113 for the obligation to buy 100 shares of WFC by May 17 if the stock price will drop below $30/per share.

Break-even: $28.87

If I will get assigned by May 17, I will be pretty much happy, as Wells Fargo is a stock I would like to own for the long term, WFC has a track of record of raising its yearly dividend for 8 consecutive years. If assigned my dividend yield for 2020 would be close to 7%. Which is awesome. 

Once assigned I will be able to write covered calls. 

Yes, I'm writing a naked put here, using margin. Just for the reference, I had to lock $400 in the margin to sell this put, If counted my margin impact only, this sell (if expired worthless at the end) would mean a 28% return in 70 days. More than 145% if annualized. 

Despite we got paid upfront ($113) I will use this money only after closing position (adjustment or expiring worthless), I might buy WFC shares or other good dividend stocks from the income generated. The distributions from this fund are planned to start at the earliest in January 2025. Distributions will be made from dividends and options. 

I truly believe that in 5 years we could build an additional and sustainable EUR 500/income month from options + dividends.

Let me know, how your mom's portfolio is doing,