Aug 22, 20203 min
Updated: Jan 16, 2021
Hey Investors and Traders!
It looks like we have some winners in our portfolios this week, including our beloved Apple AAPL! They opened on Monday at $464.25 and closed this past Friday at $497.48, hitting an all-time-high this week! Woohoo! It seems that a lot of investors are ready for the company's stock split at the end of this month.
Here are some notable price movements in the stocks we're trading:
Microsoft MSFT
Monday Open: $209.60
Friday Close: $213.02
Advanced Micro Devices AMD
Monday Open: $82.09
Friday Close: $83.80
Keep in mind that it's ideal to use the Wheel Strategy on stocks that are neutral to slightly bullish, which makes MSFT and AMD perfect candidates as they are in consolidation right now.
Trade of the Week:
If you are restarting your Wheel, here are some recommendations you can use on Monday.
Selling a Cash-Secured Put on AMD
AMD - $83.80
Capital needed: $8,200
Expiration Date: September 11, 2020
Strike: $82 (Willing to buy the 100 shares at this price)
Premium: $300
Cost Basis: $82 - $3.00 = $79.00
Note: If you want to be more conservative, you can select a strike lower than the current price. You can consider choosing the $81, $80, or $79 strike. You won't receive as much premium the further OTM you go. However, if you are assigned the 100 shares, you will be able to purchase the shares at a cheaper price.
Selling a Covered Call on AMD
AMD - $83.80
Capital needed: $8,380
Expiration Date: September 11, 2020
Strike: $84 (Willing to sell the 100 shares at this price; This is an ITM call)
Premium: $378
Cost Basis: $83.80 - $3.78 = $80.02
Selling a Cash-Secured Put on MSFT
MSFT - $213.02
Capital needed: $21,250
Expiration Date: September 11, 2020
Strike: $212.50 (Willing to buy the 100 shares at this price)
Premium: $630
Cost Basis: $212.50 - $6.30 = $206.20
Note: If you want to be more conservative, you can select a strike lower than the current price. You can consider choosing the $210 or $207.50 strike. You won't receive as much premium the further OTM you go. However, if you are assigned the 100 shares, you will be able to purchase the shares at a cheaper price.
Selling a Covered Call on MSFT
MSFT- $213.02
Capital needed: $21,302
Expiration Date: September 11, 2020
Strike: $215 (Willing to sell the 100 shares at this price)
Premium: $455
Cost Basis: $213.02 - $4.55 = $208.47
Extra Shares In Your Pocket
If you are finding yourself being called out often and want to profit some more, you can consider buying an extra 10-50 shares on the side. For example, if you want to enter AMD with a covered call, instead of buying 100 shares, you can buy 110 shares. This way if AMD rises significantly, you'll get called away but still be able to ride the price movement up with your extra 10 shares. Nifty trick huh?
Earnings:
Bob the Builder is happy man this week as Home Depot HD delivered a great report card! Revenue for the quarter rose 7.1% to $28.26 billion from $26.38 billion a year earlier, topping analyst expectations of $27.54 billion. Home Depot’s same-store sales grew 6.4%, beating expectations of 4.4%.
The Corona-virus and the changes in consumer trends it’s spurned have led to a boom in Home Depot’s e-commerce business, Ted Decker, Executive Vice President said. “As shelter-in-place orders rolled out across the country in mid- to late-March, we saw our digital businesses accelerate from approximately 30% growth in early March to triple digit growth in early April” he told investors. “During the last three weeks of the quarter, traffic to HomeDepot.com was consistently above Black Friday levels.”
We believe that Home Depot HD is a great long-term investment, and we're sure Bob the Builder agrees too.
Final Thoughts:
We know we sound like a broken tape recorder, but remember to keep the majority of your portfolio in high-quality, dividend-paying stocks and to not go all in the stock market, just in case of a pullback in the future.
Stay safe and healthy!
- 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.