🔒 Premium Membership Positions - July 3, 2022

Hi Advanced Traders!

We had another great week with the markets not really going anywhere. We also had AMD have a dramatic drop, meaning that the bear call spreads we set up a few weeks ago should be profitable. If you haven't done so already, you can close out your positions (50-80% value) and lock in your profits.

As mentioned in my webinar, we are still going to set up some bear call spreads on AMZN.

AMZN BCS:

Here is the AMZN BCS trade:

Expiration Date: July 29, 2022

Step 1: Buy 1 $145 strike call option (delta 0.03) for $17.

Step 2: Sell 1 $125 strike call option (delta 0.18) for $128.

Step 3: Set up a buy-stop order of 100 shares for $124 per share.

Credit: $128 - $17 = $111 per bear call spread

The goal is to have AMZN stay below $125 from now until July 29. If it does, both legs will expire worthless and you will be able to keep $111.

If AMZN rallies up to $125, you will buy 100 shares for $124 each, convert your bear call spread into a covered call, and sell your first leg.

Keep in mind that AMZN will have corporate earnings soon. Right now, they are expected to report sometime in the first week of August. If you are worried about the volatility, feel free to sit out of this trade.

📌BCS Notes

By setting up bear call spreads, you are essentially willing to convert your trade into a covered call. You don't initially have to own the 100 shares. However, if the stock rallies, you will want to have the capital ready to cover yourself.

Remember that you don't necessarily have to wait until expiration to end the trade. You can always lock in your profits if your contracts shrink 50-80% in value. This is what majority of professional traders do.

Like I mentioned last week, I noticed that some of you set up bear call spreads, observe the markets rally 1-2 days, and start to panic. Remember that we want to let the statistics play out and that there is a lot of time from now until expiration for quick drops in the underlying and theta decay to do its job.

For those of you who have been setting up bear call spreads over the past 6 months, you most likely see how powerful this trade is since we just need the stock to not really go anywhere in a short amount of time.

I also want to mention that there will be days where we will have volatile relief rallies. If you plan to set up 20 bear call spreads, you can consider setting up 10 now, and another 10 after a relief rally. Like what I always say, "when in doubt, split it out."

Like always, you can use these numbers as a guide and feel free to tweak the numbers to your own preference and risk-tolerance.

Happy trading!😀

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.