One method of pulling money out of the stock market on a regular basis is covered call writing. This strategy can be extremely profitable if done correctly.

So, what is covered call writing? When an investor sells a call on their stock what they are doing is selling another investor the right to buy the stock from them at a given price at some point in the future. For example if you own stock XYZ and it is trading at $53 you may decide to sell the front month $55 call for $4.

You would receive $4 up front, but you would also be obligated to sell your stock at $55 if you are called out. Well obviously no one is going to make you sell a $53 stock at $55, so it is pretty likely that the trade is going to be profitable.

However if the stock goes up above $55 then it is a different story. If a stock breaks $55 then chances are you will get called out of your investment and forced to sell your stock.

So, there is some risk when it comes to selling covered calls. Let us say that the stock goes up to $75 then you will be forced to sell the stock at $55 and have to make a much smaller profit then if you did not sell the call. And moves like that can happen in a relatively short period of time.

But then again covered call selling can be the perfect way to increase your returns in the long haul. If the stock stays flat, goes down, or even comes up a little the call will expire worthless and you would walk away with the profits.

The consistency you can recieve by selling calls month after month can be worth the risk. While it can be risky it can also be a great strategy, this is especially true when you combine it with fundamentally strong dividend paying stocks.