Using option VS dividend stocks to generate cashflow. Which is a better choice?

If you are selling puts, just make sure you are aware of the risk and try not to sell naked puts (you cant cash secure it).

Well, what if you could do Options on Dividend-Paying stocks?

(ba-dum tsk!)

Jokes aside. They do offer different purposes for different investors.

To a certain extent, there is a steeper learning curve to understanding options. Many business students (finance majors included) have only

Selling options can be a good way to optimise one's portfolio and achieve enhanced yields or achieve a certain payoff they desire.

Dividend paying stocks provide a (usually) long stream of consistent paying income. One also has to consider income + capital gains in assessing their total return on investment. However on the execution front, it's easy to keep some in consistent paying stocks as they also tend to be less volatile in nature and have some level of predictability.

The quick answer is, if one understands the mechanisms of options pricing, you would probably have a higher income - with higher risks.

The difference is that in options, you would usually require some view of "direction" (or non-directional); the possible magnitude of the move (or not); and the timing.

I personally prefer options as it is more flexible on choosing when and how much i would like to get paid in my desired timeframe. That being said, it's worth diversifying your portfolio into some passive dividend stocks for the sake of monitoring it less.​​​