Turn Netflix Shares into Cash Flow with Covered Calls

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  Stocks and Investing on Tue, Dec 23rd, 2025 by Forbes
      Locale: UNITED STATES

How to Generate Passive Income From Netflix Stock – A Practical Guide

In the latest Forbes feature, “How to Generate Passive Income From Netflix Stock” (published December 23, 2025), author Jorge Mendoza‑García lays out a concrete, multi‑step framework that turns Netflix’s high‑profile, high‑growth equity into a source of regular cash flow. While Netflix is traditionally known for capital appreciation rather than dividend payouts, the article demonstrates that disciplined strategy can transform a single stock into a “yield‑generator” for long‑term investors.

1. The Problem: Netflix’s Dividend‑Free Reality

The piece opens by acknowledging the obvious fact: Netflix (NFLX) does not pay dividends. As Mendoza‑García notes, this makes the stock a “pure play” for growth, but also means that investors who rely on dividend income need to adopt alternative tactics. He links to a deeper dive on Netflix’s earnings history, illustrating how its share price has surged 7‑fold in the past decade—an impressive return that, if captured early, can provide the capital base needed to generate “secondary” income streams.

2. The Core Idea: Covered Call Writing

The cornerstone of the article’s strategy is covered call writing—selling call options on shares you already own. The author explains how a covered call yields premium income while still retaining upside potential if the stock climbs past the strike price. Key takeaways:

The article even includes a step‑by‑step screenshot (link provided to a brokerage’s options screen) that shows how to place a covered call order on NFLX using the “Option Chain” interface. Mendoza‑García stresses that the “cash‑covered” component of a “cash‑secured put” (another strategy he mentions later) is optional, and most casual investors can focus solely on calls.

3. The “Double‑Strike” Strategy: Combining Calls and Puts

For readers who want to diversify risk, the author proposes a “double‑strike” strategy—buying shares and simultaneously writing a covered call while also selling a cash‑secured put at a lower strike. This creates a “squeeze” of potential income on both sides of the price spectrum. The article explains:

• Cash‑secured put: You sell a put option and set aside enough cash to buy the shares if the option is exercised. The premium received provides a cushion. If the put expires worthless, you keep the premium; if it is exercised, you acquire the shares at a discounted price, further fueling the covered call pool.
• Income cycle: Premiums from both the call and put can be collected each month, generating a steady stream of “mini‑dividends.”

Mendoza‑García includes a chart that illustrates typical monthly cash inflow under a double‑strike scenario, citing data from the past 12 months of NFLX volatility.

4. Re‑investing Premiums: The Power of Compound Growth

A critical point emphasized in the article is that premium income is not a one‑off. By reinvesting option proceeds back into additional NFLX shares, an investor gradually expands the covered‑call “base” and compounds earnings. The piece offers a quick spreadsheet model (link to a downloadable Google Sheet) that projects net cash flow over 5 years assuming a 4% average annual premium yield and 10% annual appreciation in share price.

5. Tax‑Efficient Execution

Mendoza‑García dives into the tax implications of option strategies, linking to an external article on “Tax‑Efficient Ways to Earn Passive Income From Stocks.” Key points:

• Capital gains vs. ordinary income: Premiums are short‑term capital gains, taxed at the investor’s ordinary rate. However, gains from the eventual sale of NFLX shares are subject to the long‑term capital gains rate (0–15% in the U.S.) if held over a year.
• Tax‑loss harvesting: If a call or put expires at a loss, the loss can offset other capital gains or up to $3,000 of ordinary income.
• Qualified dividend rule: Not applicable to NFLX, but the article reminds investors to keep their overall portfolio diversified to avoid concentrated risk.

The author also recommends using a tax‑advantaged brokerage account (e.g., an IRA or 401(k) that accepts options) to defer taxes on option premiums.

6. Risk Management & Portfolio Context

Recognizing that NFLX is a high‑beta play, the article stresses risk mitigation:

• Position sizing: No more than 5–10% of the portfolio should be in a single, high‑volatility stock.
• Diversification: The article points readers to a linked Forbes piece titled “Diversifying Beyond Tech: Building a Balanced Portfolio” that discusses allocating capital to non‑tech sectors, bonds, and other growth stocks.
• Monitoring: Regularly reviewing implied volatility and market sentiment helps adjust strike prices and expiration dates to optimize premium yields.

7. Putting It All Together: A 12‑Month Roadmap

The feature concludes with a concise “Action Plan” for readers who want to begin generating passive income from Netflix:

1. Buy at least 50 shares of NFLX (or more, if capital allows).
2. Write a covered call with a strike 5–10% above current price for the next month.
3. Sell a cash‑secured put at a lower strike to double‑your income.
4. Re‑invest any premium earned into additional shares at the end of each month.
5. Repeat the process, adjusting strikes annually to align with new price levels and market volatility.
6. Track the portfolio’s net cash inflow in a simple spreadsheet.

The article assures readers that, while Netflix remains a speculative investment, disciplined option writing coupled with a disciplined reinvestment policy can convert a growth‑only stock into a semi‑passive income generator.

Final Thoughts

“How to Generate Passive Income From Netflix Stock” provides a roadmap for turning a dividend‑free, high‑volatility equity into a source of consistent, scalable cash flow. By leveraging covered calls, cash‑secured puts, and disciplined reinvestment, investors can capture premiums that act like miniature dividends while still benefiting from the stock’s long‑term appreciation. Mendoza‑García’s practical, data‑driven approach—and the linked resources for deeper dives into options strategy, tax considerations, and portfolio diversification—make the article a useful reference for anyone looking to get the most out of Netflix’s stock beyond the headline growth numbers.