Apr 2, 20216 min
Updated: May 28, 2021
Hey Everyone!
Wow, it looks like we had a nice uptick in the markets this week with the S&P500 and DOW30 hitting some all-time-highs and even the NASDAQ slowly climbing back up to it's peak.
Here's a snapshot of how the overall markets did this week:
Trade of the Week:
If you've been trading the Wheel Strategy, you most likely got assigned your 100 shares from your CSP or your covered calls expired worthless.
Just like last week, here are two options you can consider taking:
Option 1: To restart your Wheels again on Monday, you can consider selling around 4-6 weeks out at the same strike price that you sold last month. For example, if you had a Wheel for PINS and sold a covered call at the $76 strike, you can resell your next call at the $76 strike again. This way, you will still be collecting premium and lowering your cost basis as you patiently wait for your shares to retrace back up.
Option 2: Because you initially sold covered calls against your shares to lower your cost basis, you can also consider selling 1-2 strikes below your initial sold strike price. For example, if you purchased 100 shares of PINS for $76 and sold a call for $400, your new cost basis is $76 - $4.00 = $72.00. Instead of selling at the $76 strike, you can consider selling at the $75 or $74 strike. You will be obligated to sell your shares for a lower price than you initially purchased them for and higher than your new cost basis. However, you will be able to collect more premium since you are selling a little closer to the ATM strike.
Pay attention to the delta: You can always look at the delta of the call you are selling since the delta roughly approximates the probability of the price of the stock reaching the strike by expiration. If you see that the delta is 0.10, you know that there is roughly a 10% chance that the price of the stock will reach that strike price by expiration. Likewise, if you see that the delta is 0.20, you know that there is roughly a 20% chance that the price of the stock will reach that strike price by expiration.
If you're a beginner, we recommend you starting off with selling cash-secured puts around 1-3 strikes OTM. This is typically a conservative starting point when starting the Wheel Strategy. However, if you're more bullish about the markets, we recommend starting your new Wheel by selling a covered call around 1-3 strikes OTM to not only receive the premium, but also make capital gains if you are called away at expiration.
Here are some trade recommendations and see what fits your personal risk-tolerance:
MSFT:
Starting a New Wheel: Selling a Cash-Secured Put on MSFT
- MSFT's Current Price: $242.35
- Capital needed: $24,000.00
- Sell at the Expiration Date: 2021-04-30
- Select the Strike: $240.00
- Premium you'll receive: $540.00
- Cost basis: $240.00 - $5.40 = $234.60
Starting a New Wheel: Selling a Covered Call on MSFT
- MSFT's Current Price: $242.35
- Capital needed: $24,235.00
- Sell at the Expiration Date: 2021-04-30
- Select the Strike: $242.50
- Premium you'll receive: $650.00
- Cost basis: $242.35 - $6.50 = $235.85
AAPL:
Starting a New Wheel: Selling a Cash-Secured Put on AAPL
- AAPL's Current Price: $123.00
- Capital needed: $12,200.00
- Sell at the Expiration Date: 2021-04-30
- Select the Strike: $122.00
- Premium you'll receive: $362.50
- Cost basis: $122.00 - $3.62 = $118.38
Starting a New Wheel: Selling a Covered Call on AAPL
- AAPL's Current Price: $123.00
- Capital needed: $12,300.00
- Sell at the Expiration Date: 2021-04-30
- Select the Strike: $124.00
- Premium you'll receive: $365.00
- Cost basis: $123.00 - $3.65 = $119.35
AMD:
Starting a New Wheel: Selling a Cash-Secured Put on AMD
- AMD's Current Price: $81.09
- Capital needed: $8,100.00
- Sell at the Expiration Date: 2021-04-30
- Select the Strike: $81.00
- Premium you'll receive: $415.00
- Cost basis: $81.00 - $4.15 = $76.85
Starting a New Wheel: Selling a Covered Call on AMD
- AMD's Current Price: $81.09
- Capital needed: $8,109.00
- Sell at the Expiration Date: 2021-04-30
- Select the Strike: $81.50
- Premium you'll receive: $372.50
- Cost basis: $81.09 - $3.73 = $77.37
NKE:
Starting a New Wheel: Selling a Cash-Secured Put on NKE
- NKE's Current Price: $132.53
- Capital needed: $13,200.00
- Sell at the Expiration Date: 2021-04-30
- Select the Strike: $132.00
- Premium you'll receive: $345.00
- Cost basis: $132.00 - $3.45 = $128.55
Starting a New Wheel: Selling a Covered Call on NKE
- NKE's Current Price: $132.53
- Capital needed: $13,253.00
- Sell at the Expiration Date: 2021-04-30
- Select the Strike: $133.00
- Premium you'll receive: $352.50
- Cost basis: $132.53 - $3.53 = $129.00
PINS:
Starting a New Wheel: Selling a Cash-Secured Put on PINS
- PINS's Current Price: $77.73
- Capital needed: $7,750.00
- Sell at the Expiration Date: 2021-04-30
- Select the Strike: $77.50
- Premium you'll receive: $485.00
- Cost basis: $77.50 - $4.85 = $72.65
Starting a New Wheel: Selling a Covered Call on PINS
- PINS's Current Price: $77.73
- Capital needed: $7,773.00
- Sell at the Expiration Date: 2021-04-30
- Select the Strike: $78.00
- Premium you'll receive: $472.50
- Cost basis: $77.73 - $4.72 = $73.01
Jobs Report
Job growth shot up in March at the fastest pace since last summer. The Labor Department reported that this may be due to stronger economic growth and the overall vaccination effort.
Nonfarm payrolls increased by 916,000 for the month while the unemployment rate fell to 6%. Some economists were looking for an increase of 675,000 and an unemployment rate of 6%.
Some of the sectors that grew the most were among businesses that were hit hard due to the shutdowns associated with the pandemic, including restaurants and bars, which added 176,000 jobs. State and local education jobs rose by 126,000 as schools started to reopen. Hotels and other accommodations added 40,000 jobs, and the category that includes performing arts, spectator sports and amusement parks added 64,000.
Because of this good news, it put a smile on Wall Street's face.
Microsoft News
On Wednesday, the US Army reported that they awarded Microsoft a contract to produce augmented reality systems based on its HoloLens 2 device called Integrated Visual Augmented Systems (IVAS). The devices are designed to help soldiers, "fight, rehearse and train using a single platform," the Army said.
The deal has a five-year base and a five-year option to extend, and could be worth up to almost $21.9 billion over the full 10 years. What does this mean? It means that Microsoft is about to add on some more digits to their top-line revenue!
And yes, there is some news that Microsoft is planning on buying Discord. However, we still want to see how this deal pans out and how this is going to help Microsoft bring in more revenue.
Level 3 Launch 🎉
Woohoo! Our Level 3 video series now live and we're so excited to share it with you! This is where you're able to learn how to profit during neutral to bear markets, very similar to what we are experiencing right now with many of our favorite tech stocks.
If you're already a Premium Member, you'll have access to all of this content on top of the Level 2 video series and Premium Membership Positions. If you want to upgrade your plan, feel free to contact us at info@calltoleap.com and my team will help you with it.
Discord Launched! 💬
Investing, trading, and building wealth was a lonely journey for me. This is why my team and I created a Discord group for you and the other members to shares ideas and support one another. You don't have to go through it alone as we're all here to help. 😉
Make sure to check it out on the bottom of your "Dashboard" and follow the instructions on how to sign up.
Remember that we are a community of wealth builders at all different levels, so be positive, kind, and helpful to others, so we can help each other get to financial freedom much faster.
Level 1 FAQ 🙋♂️🙋♀️
Have questions? Before asking me and my team, feel free to check out our Level 1 FAQ. This FAQ is located on the Level 1 page. You might find what you're looking for. 😊
If you do have questions, make sure to ask them in our Level 1 or Level 2 page, rather than asking us via email.
Have a wonderful weekend, everyone! 😀
-Steve and the Call to Leap Team
The following article is strictly the opinion of the author and is to not be considered financial/investment advice. Call to Leap LLC and the author of this article does not claim to be a registered financial advisor (RIA) or financial advisor. Please visit our terms of service and privacy policy before reading this article.