🔒Premium Membership Positions - February 26, 2023

Hi Wealth Builders! 👋

The third scenario of "no landing" of inflation weighed down markets this week as stocks wrapped the worst week of the year so far. Investors saw a higher than expected core PCE (personal-consumption-expenditure) index that jumped 0.6% in January (+4.7% YOY) indicating that consumers are not slowing their spending. I see this week's performance as further confirmation that we need to be mindful that the Fed has to fight inflation and that markets will likely take a bit of collateral damage.

This isn't the first increasing inflationary period for our markets nor will it be the last so remember to always invest to your risk tolerance, always be learning, and take a long-term view on investing.

Heat Map📈

Here's this week's heat map:

How's the S&P500 doing?📊

SPY

All three major markets dropped more than 2% last week. This extended to all subsectors across the S&P 500 index (recall last week we saw divergence of investor preference as growth sectors were favored over traditional value sectors).

Also, in response to uncertainty and obstacles this week, volatility increased and the VIX (i.e., volatility index) rose by almost 4% over the week. Typically, volatility moves in opposite direction as stocks (i.e., more volatility the environment drops equity prices lower). From an options perspective, more volatility usually means options are more valuable (all other things equal) because there's more movement and likelihood of an option becoming in the money.

For me personally, I always keep an eye on the macroeconomic conditions and invest to my comfortable risk level. History tells us markets are upward trending over the long run so I just need to be smart with risk during shorter term fluctuations. Always practice good habits!

Steve's Trades

AAPL Cash-Secured Puts:

Expiration Date: March 31, 2023

Step 1: Have $12,500 of cash as collateral

Step 2: Sell 1 $125 strike put option (delta -0.07) for $48.

Credit/premium received: $48

Please remember that selling a CSP means you want to buy 100 shares at the strike price. If the shares are assigned to you, we can start earning premium from covered calls on this new position. Be sure you're ok with buying AAPL at $125.

AAPL Bear Call Spread:

In case AAPL doesn't move much at all over the near term, we can set up a bear call spread. If you had any Bear Call Spreads that have decayed more than 50% because of the recent market dip, feel free to close out your positions.

Expiration Date: March 31, 2023

Step 1: Buy 1 $182.50 strike call option (delta 0.01) for $5

Step 2: Sell 1 $160.00 strike call option (delta 0.15) for $90.

Step 3: Set a buy-stop order of 100 shares at $159

Credit/premium received: $90 - $5 = $85

If the stock rallies towards the second leg's strike price, you'll purchase 100 shares to cover yourself and convert your bear call spread into a covered call trade.

Our goal from the CSP position and the Bear Call Spread position here is for AAPL to stay between $125 and $160. If the stock rapidly rallies up, we can close our CSP early and if the stock rapidly drops, we can close our BCS early. As always, check to see if you are comfortable with these trades and if it fits your risk tolerance.

Ask Steve 🤔

Q. How does one understand how to use / understand the heat maps available?

A: The heat maps are just a percentage of how much a stock went up or down during the week. It is typically given in a percentage :). It just gives us a visual of how stocks performed during the week.

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Have a wonderful weekend! It looks like we are slowly going higher! 😀

-Steve and the Call to Leap Team

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