Here’s My 3-Part Plan for Turning a Bloom Energy Stake Into Real Retirement Income

My three-part options income strategy

With its share price surging this year, Bloom Energy currently trades at a rich valuation at 14 times forward sales and 73 times forward earnings. While I have a lot of conviction in the stock, I don’t want to load my portfolio with shares at that valuation. That’s why I’m starting my strategy by writing cash-secured put options to buy shares at a much lower price. Writing a put obligates me to buy 100 shares at the strike price at expiration. In exchange, I receive an upfront income payment. I can use that income to invest in other stocks, including potentially adding to my uncapped Bloom Energy position.

I recently completed my first round of writing put options on Bloom Energy and just wrote another round. I plan to continue writing cash-secured puts on Bloom Energy until I get assigned shares. Once assigned, I will start the second part of my income strategy by writing covered call options on those shares. This will enable me to generate more options premium income, in exchange for the obligation to sell my shares at the designated strike price. I hope to write call options above my assignment price, enabling me to sell them at a profit.

I will then write covered calls on Bloom Energy until my shares get called away — meaning they close above the strike price, triggering a sell — to continue the income-generation train. Once this happens, I’ll start phase three, writing put options again to buy shares at a lower price to generate more income. This will start a new repeatable trade of writing puts to generate income.

This three-part options strategy is known as the wheel strategy. It aims to create a repeatable income trade on an underlying stock or index by first writing puts, then writing calls, and then writing puts again. The flywheel spins off income that I can use to make other investments.

This isn’t a risk-free trade

The options wheel strategy can be a very lucrative source of income. However, it’s far from risk-free. I’m using it on a stock that pays a very lucrative options premium for a reason: it’s a highly volatile company trading at a rich valuation. There’s a real risk that Bloom Energy’s stock could tumble below my written put strike price to the point where writing covered calls on those shares would be an unappealing choice, as it would lock in a loss. This trade also caps my upside to the options premium received or the call strike price on a written call. I’m willing to accept that trade-off because I’m using a portion of my portfolio’s cash position specifically earmarked to generate options premium income. I also own some Bloom Energy that I’m leaving uncovered for uncapped upside. This is also a much more active way to generate income, which might become less lucrative in the future if Bloom Energy becomes less volatile.

Earning income on a high conviction position

Bloom Energy has become a crucial provider of power solutions to help accelerate the development of AI data centers. I think it’s a fantastic company with strong long-term growth potential, though it’s trading at a high valuation. I’m leveraging my conviction in the company as a foundation to generate additional income for my retirement account. This strategy isn’t for everyone, as it’s higher-risk and requires more active oversight. That’s fine with me, given my strong conviction in the company and my desire to use it to generate a real stream of retirement income to build an even bigger nest egg.