Membership Positions - August 30, 2020

Hey Investors and Traders!

We gotta look at Microsoft (MSFT) again this week; at a 6% jump by the week's close, it closed at around $228.44 up from $214.81, breaking an all-time high. Statistically, MSFT has been one of the more historically stable, gradually upward-trending stocks for a while now (dot com bubble burst notwithstanding) way back since CDs and off-white desktops were a thing.

Talk about retro tech.

Here are some notable price movements in the stocks we're trading:

Estee Lauder EL

Visa V

With a huge pump to the bull rally in the markets this week, you can expect to see premiums on calls bloat, creating a good sell opportunity.

Trade of the Week:

For the coming Monday, consider the following below but remember to look at the market prices at open to understand how you should decide what to do; prices may vary at market open from today's close. If there's a massive plummet at open, stretch the expiration dates out a bit further than what you see below.

Selling a Cash-Secured Put on AMD

Selling a Covered Call on AMD

Selling a Cash-Secured Put on MSFT

Selling a Covered Call on MSFT

Big rally bloats call premiums

We're looking at a tighter expiration time frame because of a stronger bullish rally during the past week. Remember why we're doing this; when prices move up aggressively, call premiums increase (calls become more valuable).

On the call side, if there's a correction this week, those massive premiums will really protect the downside. If the rally continues and you get assigned, as usual, capitalize on the put premiums the following week.

On the put side, if there's a correction, you'll get assigned to buy the shares. No big deal; with fundamentally strong, dividend-paying stocks, holding the shares is not such a bad outcome. If the rally keeps going on, those puts shield you from the opportunity cost. Yes, investing FOMO is a real thing and cash-secured puts lets you ride the wave up since it literally pays you for missing out.

Earnings:

Let's talk about Estee Lauder (EL) because it is one of the companies we like. Although earnings passed a little more than a week ago already and they had already set a low (negative, actually) guidance on EPS for Q4 and actually managed to go even lower, it's worth mentioning that not every fundamentally strong company will hit the mark every time.

With an expected EPS of -$.19 and an actual of -$.53, why is EL still on the radar? People. Management teams who know how to handle rough times and manage expenses well are expected to keep the company running at full speed. Historically, look at the troughs and how the stock retraces and you'll see why. We haven't seen compelling reasons to drop EL for now but we'll keep a very close eye for the next couple of quarters.

Now with that said, it's important to remember to maintain a diversified portfolio. It's also important to not be emotionally attached to an investment. Operating your portfolio is like running a business; if there are parts of your business that are not profitable, it's time to part ways.

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.