Securing options authorization from your broker is a critical first step. Without it, you won’t be able to take advantage of all the opportunities Income Millionaire has to offer.

You should be able to do this through your existing broker, but if you’re interested in finding out which brokers offer the best options service, then this guide may help you choose the right one.

No matter which broker you choose, the authorization process will be similar, and your objective will be the same: You want to get approval to sell cash-secured puts and covered calls.

Puts and calls are contracts between traders to buy and sell shares of stock at an agreed-upon price by a specific date. One contract represents 100 shares of stock.

When we sell one put option, we’re agreeing to buy 100 shares of stock at a certain price by a specific date.

When we sell one call option, we’re agreeing to sell 100 shares of stock that we already own at a certain price by a specific date.

“Cash-secured” simply means that, should you end up getting a stock put to you, you’ll have enough cash on hand to be able to buy the stock.

And remember: That’s not a bad thing — in Income Millionaire, we’re selling puts only on solid stocks we’d want to own anyway!

We’ll go into greater detail on the nuts and bolts of this strategy further down.

Now, let’s continue walking through the authorization process.

The Fine Print

The information you submit to your broker will fall into one of four different categories.

The first category is investment objectives.

Most brokers typically list four such objectives, with increasing degrees of riskiness: income, growth, aggressive growth, and speculation.

Many traders will simply check off all objectives listed, since as you grow as a trader, your objectives may grow with you.

But even just selecting “income” should still get you the approval level you’ll need for Income Millionaire.

The second category is trading strategies. These include buying stock, selling puts and covered calls (which is what we’ll be doing), credit spreads, and more.

Again, many traders simply check off all the strategies, since you may want to start using additional strategies down the road.

Different brokers have different trading levels, so call your broker for guidance.

For example, Fidelity requires trading level 1 for covered calls, level 2 for selling 100% cash-secured naked puts, and level 4 for reduced-margin naked puts.

By contrast, Charles Schwab requires trading level 0 for covered calls, level 1 for 100% cash-secured naked puts, and level 3 for reduced-margin naked puts.

Since we’ll be selling puts only on solid stocks we’d want to own anyway, we recommend keeping the necessary cash to make the purchase in reserve in your brokerage account — that means selling only cash-secured puts. This ensures you’ll have the cash on hand necessary to buy the stock without having to worry about the possibility of a margin call.

If, however, you’re an aggressive investor who’s comfortable with risk, then you can put more of your money to work by setting up a margin account. With a margin account, the initial capital requirement per trade is much less — only 20% to 25% of the purchase price of 100 shares per contract vs. 100% of the purchase price in a cash account.

Keep in mind that the reduced capital requirement of a short put in a margin account is not fixed but can increase after trade initiation if the stock price drops in value.

If you do set up a margin account, federal regulations require that you maintain at least a $2,000 balance in that account.

Again, we recommend that you sell only cash-secured puts since our goal is to eventually own the stock anyway. But that decision is ultimately up to you.

The third category is trading experience. Your broker will want to know how long you’ve been trading stocks and options.

Many new traders get hung up here. But don’t be shy answering this question. The more years you’ve been trading, the more likely you are to secure the authorization level you need.

And remember, even if you personally have never traded options before, you won’t just be shooting in the dark—you’ll be following my advice, and I’ve got many years of trading under my belt.

Finally, there will be a few questions about your personal finances — your liquid net worth, total net worth, annual income, income sources, etc. Of course, higher numbers are better. But as with all questions on these forms, honesty is the best policy.

The Run-Around

If for some reason your broker doesn’t give you the clearance that you sought, then you’ll need to reapply for approval.

Before proceeding, it’s a good idea to contact your broker first to discuss why you weren’t approved. They may recommend additional steps that will get you approved — such as a short period of paper trading.

Several of the trading platforms, including TD Ameritrade’s thinkorswim and Charles Schwab, allow you to do “paper trades” as a way to practice options trading using fake money.

Paper trading is a great way to increase your trading experience (and confidence!) so that you can reapply for a higher trading level than you were initially granted.

Read more about paper trading here and then start placing trades exactly as if you were using real money.

However, your quickest solution may be starting the process over with a different broker.

After you’ve filled out and submitted your forms, the next step is to fund your account.

You can do this immediately, while you’re waiting for your authorization to come through.

To follow along with Income Millionaire’s recommended strategies, we suggest making sure you have at least $20,000 in your account to start out. Of course, that’s just a suggestion. You can start with less if you want.

How to Get Paid to Buy Low and Sell High

If you’re like me, you hate paying retail when buying, and you always want just a few pennies more when selling. So you use limit orders to enter and exit your positions — below market for the former and above market for the latter.

The problem is the market doesn’t always cooperate.

When I set a stingy limit for a stock I want to buy, my order might not get filled for weeks. And when I’m ready to sell, the market might not accommodate the lofty price I have in mind.

In both cases, money that could be productive is mostly sitting idle. But I realized I could use options to solve both problems while getting paid handsomely to boot.

My new strategy lets income investors win in several ways.

Selling Puts to Buy Stocks at a Discount

First, we can generate instant income without actually owning a stock.

Selling a put is just another way of setting a limit order to buy a stock we’d want to own anyway. But instead of sitting around and waiting for our order to get filled while making no money, we get paid up front.

Further, options allow us to precisely calibrate our risk by setting parameters for the price and timing of the contract.

When you sell a put, you’re entering a contract that will require you to buy 100 shares of stock at a certain price by a specific date.

After you sell the put and collect your instant payment, there are two ways the trade will play out. So let’s walk through both scenarios:

In the first scenario, the put that we’ve sold expires worthless, without the stock reaching the price we’ve set.

No problem! We are free of any obligation and can go on to sell another put if we choose.

Meanwhile, the money we collected up front at the start of the trade is ours to keep.

In the second scenario, the stock reaches the price we’ve set when the option expires.

Again, this is not a bad outcome: We are now buying a stock we wanted to own anyway, but we’re getting the stock at a nice discount to where it traded when we first sold the put.

And we still get to keep the cash payment we collected at the beginning of the trade.

Since I’m a risk-averse investor, I will only ever recommend selling puts on dividend-paying stocks that we’d be happy to own anyway.

As an income investor, I want to get paid at least once a quarter, just like I do when owning a typical dividend stock. So we’ll generally be selling puts that expire in the next three to four months.

Selling Covered Calls to Sell Stocks at a Premium

If the stock gets put to us, we’ll sit back, relax, and collect the dividend until the stock approaches full value.

At that point, rather than setting a sell limit at a premium price (and getting nothing if the order doesn’t fill), we’ll sell a call with a strike at that premium price instead.

Remember, each call is a contract that represents 100 shares of stock. So the number of calls you sell should be based on the number of shares you actually own.

If you happen to own shares in multiples of 100, then it’s easy. If not, then simply round down to the nearest hundred. For instance, if you own 343 shares of stock, you would only want to sell 3 covered calls against it.

Here, again, two scenarios can play out.

If the stock doesn’t get called away, we win by enhancing the stock’s dividend stream with additional income from selling the call.

If the stock does get called away, we win by selling the stock at a premium and getting paid to do it when we sold the contract that made the transaction happen.

Winning Doesn’t Require Perfection

Investing can be highly emotional. And many investors can lament trades in hindsight. But don’t let the perfect be the enemy of the good.

When you sell a naked put, you have to accept the fact that the stock you bought by selling a put may trade at an even lower price than the one at which it was put to you.

When you sell a covered call, you have to accept the fact that you could miss out on further share-price appreciation when the stock gets called away.

But perfect timing is impossible. And the fact is that, together, these tactics reduce the risk of stock ownership at all levels, while giving us the ability to generate income whenever we choose.

Speaking of winning, remember we’re putting for dough here, with short-term, low-risk trades.

On their own, each trade may seem modest at first glance. But the instant payments noted in the trade instructions are based on selling just one put — just one.

You have the power to generate multiples of that simply by selling more contracts.

But if you’re new to all this, it’s fine to start slow by selling just one contract for each trade.

After all, options can be a lot to wrap your head around at first. And if you’re still building your confidence, then I want you to go slow until you get the hang of it.

Regardless of how many trades you do or how many contracts you sell, it’s absolutely critical that you follow my instructions to the letter, particularly when it comes to setting buy limits.

Take it easy at first, and you’ll be surprised by how quickly you become an old pro, with the ability to generate a steady stream of instant income.

And as you make more money, you’ll be able to increase the size of your trades—and create even more income.

Our path to $1 million of income may seem ambitious. But it’s all about the power of compounding over time. So let’s break it down.

Thanks to advances in healthcare, many folks are living longer. Indeed, the average American spends at least 25 years in retirement.

To produce $1 million of retirement income over 25 years, you’ll need to bring in an average of $40,000 of investment income annually.

With the techniques we’re using, we’ll be able to generate income with an equivalent yield of 8% to 12% annually, while greatly reducing the risk of stock ownership.

If you’ve built your wealth over the course of your career, then you may already have $350,000 to commit to this program.

Assuming you start with that amount and we hit the midpoint of our yield target, at 10%, you’ll have generated $1 million of investment income in just 14 years.

Even before then, you’ll be bringing in the big bucks.

At five years, you’ll have made almost $214,000 of investment income. And at 10 years, you’ll have produced nearly $558,000 of investment income.

Now you see why Einstein called compound interest the eighth wonder of the world.

Of course, you don’t need to start with that amount to achieve awesome results! You can generate large amounts of income using this strategy even if you only have $20,000 to $40,000 to start.

Alright, let’s go!