Earn Over 3 Million Won a Month: Taking Dividend Stock Covered Call Products as a Lifetime Pension

He explained that if the two are mixed half and half, an investment in the mid-300-million-won range could steadily pay about 3 million won a month, or roughly 1% monthly. He emphasized that this makes it an attractive option for investors seeking a stable cash flow.

Covered calls are a strategy that earns income from a stock's volatility. In particular, in sideways markets where prices move within a range without rising or falling sharply, extra income can come from rising call option prices. Kim Chae-sung explained that because of this, covered calls can perform better than other investment strategies in sideways markets.

This is especially attractive to investors worried about dividend income tax, comprehensive income tax, and health insurance premiums. Kim Chae-sung said the current market may be the best timing to buy KOSPI covered call products, because covered calls can perform well when volatility is high or prices move sideways.

Earlier covered call products had a weakness: because they sold calls uniformly, they failed to fully capture gains when the index rose. Recently, however, many "active" products have emerged that adjust the call-selling proportion to market conditions and flexibly change the holdings in the portfolio. Kim Chae-sung explained that these changes make covered call investing more efficient by letting investors choose among products that fit market trends.

Kim Chae-sung explained that because the product earned enough from selling only about 10% of its calls in a volatile market, it could pay such a high distribution. This shows that market volatility can actually raise covered call returns, offering investors a new opportunity.

In rising markets, covered calls can be disadvantaged because they cannot fully follow the gains of the underlying asset. However, recent products have greatly improved their tracking ability, following about 90 to 95% of the underlying's gains when it rises 100. In falling markets, they cannot fully prevent index declines, but the income gained in advance from selling calls cushions the losses, Kim Chae-sung explained. This means covered calls can offer some stability even in extreme market conditions.

One of the biggest advantages of covered call investing is that it provides a stable monthly cash flow that can cover living expenses. This prevents the need to sell the underlying at a low point to fund living costs, and helps investors stay invested for the long term without being swayed by market swings. Kim Chae-sung explained that it protects investors from the risk of selling at the lowest point when they must withdraw invested assets for living expenses.

Covered calls also contribute to psychological stability because their losses in falling markets are smaller than those of the underlying. In a downturn, the urge to sell everything may arise, but a steady stream of cash acts as an anchor that keeps investors patient and in the market. Kim Chae-sung stressed that investors who stayed in the market longest ultimately achieved the best results, and said covered calls make that patience possible.

Because investment success ultimately depends on staying in the market for a long time, covered calls play an important role not only in returns but also in sustaining investment. Since cash comes in every month, investors can feel more secure psychologically, which lets them maintain long-term investing without being shaken by market ups and downs.

Early covered call ETFs had a limitation: they could not fully follow index gains when the index rose. Kim Chae-sung pointed out that comparing recent 1-month, 3-month, and 6-month performance on ETF comparison sites shows a clear tendency for early products to lag the underlying in rising markets. This was one of the reasons covered calls acquired a negative reputation in the past.

Many recently launched covered call products now track the movements of their underlying assets very closely. Kim Chae-sung explained that in dull sideways markets, covered call products can sometimes outperform the underlying. He added that in the short term, some of these products can deliver better returns, widening the range of options investors can strategically choose from depending on conditions.

Kim Chae-sung explained that the S&P 500 tracking product provides a return of about 10% a year, and the Nasdaq 100 tracking product about 15% a year. He again stressed that if the two are mixed half and half, a mid-300-million-won investment is enough to secure a cash flow of 3 million won a month, or roughly 1%. This gives investors targeting a stable monthly cash flow a concrete investment size to work with.

Kim Chae-sung explained that while the S&P 500 has risen about 15% a year on average over the past 10 years, covered call products pay dividends of around 10% a year. This means investors can receive dividend income while still enjoying part of the stock price gains. From a long-term perspective, he stressed that this gives investors confidence that their assets can be maintained or grown while steadily receiving cash flow, rather than shrinking.

Kim Chae-sung explained that they have largely addressed the past weakness of failing to keep up with the underlying in rising markets. This means investors can earn dividend income without missing much of the opportunity from rising stock prices.

Thanks to strong demand from Korean investors and the quick response of asset managers, new products are being launched continuously. This evolution means the latest Korean covered call products track their underlying much better than before and deliver superior performance.

Kim Chae-sung advised that rather than investing 100% in covered calls, it is preferable to invest only as much as needed to secure the target cash flow and put the rest into the broad index (such as the S&P 500 or Nasdaq 100) or other growth-oriented holdings. He stressed that diversification like this, building a balanced portfolio, can pursue both stable cash flow and asset growth.

That under-2% taxable portion comes from dividends paid by individual stocks held within the ETF, such as Samsung Electronics and SK Hynix, and the tax is so small that investors hardly need to worry about it. Tax savings are an important factor that raises the real after-tax return.

Instead of selling all assets or making rash decisions when the market is unstable, the cash that arrives each month helps investors calmly watch the situation and stay invested with a long-term view. This provides psychological stability and helps reduce unnecessary losses.

For example, rather than using a 10% covered call product to cover living costs, investors in their 30s and 40s could build a structure that keeps accumulating the steady cash inflow. In rising markets, the accumulated cash can earn gains by following the underlying in part, and in falling markets it can serve as spare capital for buying on dips (averaging down).

This is a strategy that uses the stable cash flow of covered calls to respond flexibly to market conditions and grow assets. In particular, holding a large amount of cash during a downturn lets investors seize low-price buying opportunities, which helps improve long-term returns. In this way, covered calls have the potential to be used in many ways depending on each generation's investment goals and strategies.

He explained that these fees are already reflected in the share price, so what investors should really consider is not the fee rate itself but how well the product performs in comparison. He stressed that in the end, a higher actual return matters more than a low fee.

Investor Buyeongnam stressed that there is no need to be overly negative about covered call products, and pointed out that the products include an automatic rebalancing feature. This feature automatically adjusts the portfolio weights according to market conditions, helping it stay in an optimal state without the investor having to intervene. This is an important advantage that increases investment convenience and reduces mistakes caused by emotional decisions.

Kim Chae-sung believes that the moment an investor jumps into the stock market and makes trading decisions personally, the chance of failure rises sharply. He stressed that the key to investment success is not investing directly oneself, but wisely choosing products that professionals manage well. When investors intervene directly, their principles tend to waver and emotional judgment can lead to losses. For that reason, he explained, choosing a product managed mechanically is the greatest advantage.