🔒Premium Membership Positions - September 22, 2023

The markets had another red week with the DOW30, S&P500, and NASDAQ ending -1.89%, -2.78%, and -3.48%, respectively.

Markets sold off after the Federal Reserve meeting on Wednesday. Fed Chair Jerome Powell stated that interest rates would not be changed and would be held at its current high rates to tame inflation. He implied that the economy is running "stronger than we expected" and that there will be one more hike towards the end of the year. He doesn't believe there is a strong enough reason to lower interest rates as of now.

Remember, the stock market likes low interest environments because it allows companies to borrow money for a lower rate to expand their business. It also gives people a reason to spend more, since things like credit card interest and new car payments are lower. Ultimately, lower interest rates stimulates the economy and increases the flow of money into the system.
 
 Again, I wouldn't worry about the sell-off since history has shown time and time again that we always end up higher later, no matter what uncertainty comes our way.

Also, as I mentioned before in the past few weeks, markets usually pull back in September anyway because of the "September Effect." Here's a website if you want to check the data for previous months all the way back to 1953.
 http://www.moneychimp.com/features/monthly_returns.htm
 

Stay patient and disciplined folks!

 DJI (DOW JONES 30)

SPX (S&P 500)

QQQ (NASDAQ 100)

We did break our upward trending support line (shown in yellow) this week. It's possible we may start to trend sideways, which means that I'll sell further expiration dated covered calls for more premiums. More on this later.

Steve's Trades

AMZN

AMZN Cash-Secured Put

Expiration Date: October 27, 2023

Step 1: Have $12,600 of cash as collateral
 Step 2: Sell 1 $126 strike call option (delta -0.37) for $375
 Credit/premium received: $375
 
 I'm choosing the $126 strike because it looks like a strong support level. Recently, it has bounced off of the $126 level.
 
 AMZN had 7 red days in a row, so sellers might be exhausted and we might see buyers come in to pick up shares at a lower price in the next coming days.
 

AMZN Bear Call Spread

 Expiration Date: October 27, 2023

Step 1: Buy 1 $170 strike call option (delta 0.02) for $11
 Step 2: Sell 1 $143 strike call option (delta 0.18) for $114

Step 3: Set up a buy-stop order of 100 shares at $142 each.
 Credit/premium received: $103

And just in case we do continue lower or consolidate sideways, I'm also setting up some bear call spreads while we wait out the uncertainty.
 
 I'm also looking to buy an AMZN LEAPS option if there is a market rally in the next coming days. If AMZN has at least a 1%+ increase and close, I'll consider buying a delta 0.80 LEAPS option for June 2025. I'll let you know my plans in the upcoming days.
 

Investing

I'm planning on purchasing some more shares of MSFT, MA, and V for my long term holds. There seems to be pretty strong support levels on these stocks. I like to think of this week as a discount period where I can average in some shares.

 MSFT

MA

V

Poor Man's Covered Calls

If you have a LEAPS option that is in the red, you can consider selling a call against it. When you do this, you are essentially converting your trade into a Poor Man's Covered Call (PMCC) or a modified calendar spread.

I made a tutorial on how to do this in the Level 3 section on the Dashboard.

When setting up a PMCC, you are essentially taking three steps:

Step 1: Buying/owning 1 LEAPS call option

Step 2: Sell a call option (oftentimes shorter dated)

Step 3: Set up a BSO to cover yourself

Note: Remember that you can't sell your LEAPS option when you still have a sold call against it. If you sell your LEAPS option back to the market, you'll essentially just have a sold call option contract, meaning that it's now a "naked" call.

However, this may not apply to the majority of you since you may not be approved for Level 4 options trading. This is the level where you are able to sell naked options, which is something I don't like to do since there is unlimited risk. Please make sure that you are always able to cover yourself just in case something surprising happens in the market.

Covered Calls

 If you had cash-secured puts from previous weeks and got assigned to buy shares at a certain strike, you can sell covered calls on those shares at the same strike. For me, I'm going out a little further in expiration date (45-60 days) to get more extrinsic value.

For example, if you were assigned shares from your cash-secured put at $100 each, you can sell at the $100 strike price for your covered call.
 

Remember, feel free to tweak any of these numbers to fit your own risk tolerance and what your portfolio is able to handle.

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-Steve and the Call to Leap Team

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