Did you know that you can to generate monthly income on a stock that you already own? You can, In fact it you can do it with just about any stock. It's called selling covered calls. It is a strategy that could make you 2-3% return on your money every month. Here I will give you a step by step procedure of how to sell covered calls.

1. The first step is to find a high quality stock that you plan to hold long term. This could be as simple as buying the SPY or some other index. Just make sure it is option able. In order for you to sell a call you must own a stock. Otherwise you'll get stuck with a naked call with could be risky.

2. Next I'll familiarize you with call options. When someone buys a call they buy the right to buy a stock at a given price, by a given date. For instance if you bought the $65 December call you would buy the right to buy this stock at $65 by the 3rd Friday of December. This would be true even if the stock was well above $65 by December. If your right is not exercised by then your call expires worthless.

3. Once you own a stock you will want to decide what call to sell. Let's say you own XYZ stock at $90. You will want to sell the call that is close to expiration. This means you don't want to sell a call that is good for more than a month.

4. You will also want to sell a call far above your stocks price if you want to keep it. So say you sell the $100 call for $3. You will receive the $3 and have to sell the stock at $100, if it goes that high.

5. Let us look at all possible outcomes.

A. The stock stays were it is or moves up a little. You keep the stock and the $3 you got for the call. You can sell another call again next month.

B. The stock moves up past $100 you have to sell it at $100. You make $10 from the stock and $3 from the option, but lose stock.

C. The stock goes down. The $3 helps you to feel better about the loss on the stock and you can sell again next month.

This is an effective way to draw money out of the stocks you already own. Also remember if you were willing to sell a call closer to the stock price the premium will be bigger and your danger of being called out will be greater. If you plan to hold onto this stock for a while sell as far from the stock's price as possible. That way you can keep your stock for as long as possible.

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