🔒Trading Spaces: Steve and Ben's Positions - January 12, 2024

by Ben Weiss, for the Call to Leap Team

We made it, everyone—Happy long weekend! Don't forget the markets will be closed on Monday, but because we're disciplined investors, our money will continue working hard for us even if we take the day off.

I want to share an inspiring interview I watched recently featuring Adam Grant, author of the book "Hidden Potential". When discussing how we individually find and develop our passions and talents, he advised:
 

"You actually gain passion as you improve at a task. When you don't like something initially, it might not be that it's not your passion; it might be that you're not very good at it yet, and it's not fun to fail and struggle over and over again. Sometimes passion actually follows effort as opposed to driving it."

This perspective really resonated with me as I experienced a steep learning curve when introduced to trading options. Sometimes it may feel like you're drinking from a fire hose—and yes, sometimes you'll "fail" (myself included). None of us are ever going to pick every stock or option strategy perfectly, but we are disciplined and committed to continually learning regardless of outcome.

As always, thank you for being a thoughtful member of the CTL community. Let's dive right into our weekly trades and outlook ahead in this week's edition of Trading Spaces.

P.S. Be on the lookout—starting next week, Steve and I will be changing up how and when we post articles here. We hope you'll enjoy hearing from us more often!

The market this week

The market was a bit choppy this week but ended up higher for the week overall to balance some of the losses we saw last week to kick off 2024.
 
 By the numbers, the Dow (+0.75%), S&P 500 (+1.70%), Nasdaq (+2.80%), Russell 2000 (+1.94%) all finished the week in the green, with big tech companies like AMZN, MSFT, META, NVDA, and AMD doing a lot of the lifting.

In the news

We received data this week for Consumer Price Index (up slightly) and Producer Price Index (down slightly) in December, giving investors mixed signals on the economy's progress towards tackling inflation and high interest rates. Many investors, myself included, remain cautiously bullish for the year head, but we may need some patience to the short term to see how the larger economic trend develops in the new year.

Take it to the bank... Earnings season kicked off this week with big names in banking report their earnings, including JP Morgan Chase, Bank of America, and Wells Fargo. A significant headwind for major US banks came from them contributing more than $8 billion combined to refill the Federal Deposit Insurance Corporation's (FDIC) deposit insurance fund, which the federal government depleted when Silicon Valley Bank, Silvergate Bank, and Signature Bank collapsed in 2023.

Look for some of our favorite big tech companies to schedule their earnings near the end of the month and into early February.

SPY

QQQ

Ben’s trades this week

Up, up and away...With my cash-secured puts (CSP) in AMZN and GOOGL that had decayed nicely (almost +80% profit), I decided to buy those options back early to close out and lock in my profit. With tech earnings season coming up later in the month, I expect implied volatility (IV) to tick up, hopefully bringing options premiums up as well. I'll look to capitalize on that higher IV and juicier premiums by opening some new CSPs shortly.

Trade 1: CMCSA (Comcast) cash-secured put (CTL Level 1)

Expiration Date: Feb 16, 2024 (a "monthly" expiration)

Step 1: Have $4,250 cash as collateral

Step 2: Sell 1 $42.50 strike put option (delta 0.41) for $1.08/share

Credit/premium received: $108/contract (minus fees and commissions)

Pros & Cons of trading CMCSA: I like being able to sell options on a smaller-priced stock in my smaller account. Stocks with less-expensive share prices will require less cash to sell a cash-secured put (or to own 100 shares and sell a covered call) compared to the more expensive AAPL, GOOGL, AMZN, AMD, etc., so this could be a more accessible entrance into the Wheel Strategy. Even though it trades well below $100, I think Comcast is fundamentally and technically strong and significantly undervalued, though it might be more stable or "boring". Be aware that more modest stocks like CMCSA can have lower IV which means you'll earn less premium as a trade off for lower volatility. It's like car insurance costing less for a standard 4-door sedan than an exotic sports car. As always, you'll want to decide if the reward is worth the risk for you.

Remember: If you want to stick to trading options in AAPL and other similar popular companies, you can consider investing in S&P500 stocks and broad-based ETFs like SPY and QQQ first to grow your balance and consider trading higher-priced options in the future.

Trade 2: AAPL LEAPS call (CTL Level 2)

Expiration Date: Jan 16, 2026

Step 1: Buy 1 $150 strike call option (delta 0.79) for $56.00

Debit/premium paid: $5600 (plus fees and commission)

I'm bullish on AAPL heading into earnings season. I see potential support around the $180 level dating back to Aug 2023. Price action, volume, RSI, and MACD indicators all appear neutral to bullish so I'm comfortable buying 1-2 LEAPS call options. (Find me on Discord if you want to get nerdy and discuss indicators!)

Investing like clockwork...As always, I held true to the dollar-cost average (DCA) method and bought a share each of SPY/VOO and QQQ. The DCA method allows me to check my uncertainty at the door about whether now is a good time buy or not. I like to stick to my schedule and buy a small number of shares regardless of the markets movement that week to keep me on track long term.

In general, I buy SPY in my taxable brokerage account because my goal one day is to sell covered calls against my shares of SPY once I've collected 100 shares. In my Roth IRA, I like to buy shares of VOO since it has a lower expense ratio (0.03%!!!) for super-long-term holding. Regardless, I love to buy high-quality broad-based ETFs. For me, time is money—I can always make more money but I can never make more time. I gladly enjoy paying smart finance professionals a small cut to decide which stocks to buy and sell, saving me from hours of research.

Steve's trades this week

Trade 1: AMZN Cash-Secured Put (CTL Level 1)

Expiration Date: Feb 9, 2024

Step 1: Have $15,500 of cash as collateral

Step 2: Sell 1 $155 strike put option (delta 0.48) for $5.75

Credit/premium received: $575 (minus fees and commission)

Trade 2: MSFT Cash-Secured Put (CTL Level 1)

Expiration Date: Feb 9, 2024

Step 1: Have $38,500 of cash as collateral

Step 2: Sell 1 $385 strike put option (delta 0.42) for $9.10

Credit/premium received: $910 (minus fees and commission)

Investing: I also purchased a few shares of HD, QQQ, and COST this week.

As always, tweak these positions to whatever you feel comfortable with and fits your risk tolerance.

Friendly reminders from Steve:

Let your money work harder for you...

I'm also getting a 5% APY by having my cash sit in my Fidelity account as I sell my cash-secured puts. Here's the link if you're interested in getting started!
 Manage Your Cash Against Rising Costs | Compare Our Rate | Fidelity
 

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Coming from a teacher's perspective, I believe it's important to engage in conversations with people who are also seeking to reach financial freedom.

Remember that we are a community of wealth builders at all different levels, so be positive, kind, and helpful to others, so we can help each other get to financial freedom much faster.

⚠️Also, please make sure to never give your personal information to people on Discord, especially people who may seem to look like Steve. There are many impersonators on Discord who will ask you to give them money to invest, which I will never do. Always check to see if the people you talk to have the "Moderator" tag in their profile. Stay safe everyone!

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You got this, everyone! Stay disciplined, pay yourself first, and always invest in your greatest asset—yourself. 🙌🏻

-Ben and Steve

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 do 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.