Jan 56 min
Updated: Jan 6
by Ben Weiss, for the Call to Leap Team
Happy New Year, everyone! I hope you had a peaceful holiday and feel ready to dive into a new trading year!
Personally, I'm not a big fan of new year's resolutions as I don't find them very "sticky" for me. Instead, I'm setting a goal to pick one or two things from 2023 that worked well for me and explore them further in 2024—that way I'm already carrying some positive momentum. Last year I really grew and learned a ton around investing and trading, and this year I've already signed up for some basic technical analysis classes through my brokerage. I want to expand my understanding of trends in the stock market and become more confident in picking my trades. Please note: I have no plans to become a day trader or professional analyst, but I always believe knowledge is power and we should always be learning.
With a renewed energy, let's dive right into our weekly trades and outlook ahead in this week's edition of Trading Spaces.
The market this week
The market appeared to finally take a breather this week from its streak of 8 straight positive weeks to close out 2023. With the holidays behind us and earning season approaching, it will be interesting to see if the macro 2023 uptrend continues into Q1 2024 or if the market decides instead to pull back or correct (loosely defined as 5-10% or 10-20% declines, respectively).
By the numbers, the Dow (-0.62%), S&P500 (-1.79%), and Nasdaq (-3.81%) all finished the week in the red, with big tech companies like AMZN, AAPL, and TSLA especially standing out. AAPL's outlook was downgraded by two analyst firms this week over concerns about weak iPhone sales growth, however the tech giant is anticipated to release its new mixed-reality Vision Pro headset in the coming months to compete with Meta's Quest product. TSLA is facing stiff competition from Chinese EV counterpart BYD and their lower-priced model "Seagull".
In the news
We received the US Labor Department's December jobs report this week, which came in a bit "hotter" than most analysts estimated, showing that the US finished 2023 with strong hiring than expected. While an unchanged 3.7% unemployment rate is a healthy stat overall, the report suggested inflation is still playing a role in the job market and may cause concern for investors looking to gage if and how the Federal Reserve will begin to lower interests rates this year.
Coming 'round the bend... Believe it or not, earnings season is already on the horizon. Coming up next week, we'll start to see some big names in banking report their earnings, including JP Morgan Chase, Bank of America, and Wells Fargo. 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
Keep rollin', rollin', rollin', rollin'....
I made moves in two of my wheels this week. During a big down day on AMZN, I decided to roll a covered call expiring Jan 19 at the $147.50 strike by rolling it out to Feb 16 and up to the $155 strike, all for a net credit. This option had already lost 75%+ of its value and I'm bullish on AMZN over the next few months. Bumping the strike up by $7.50 will allow me to realize $750 of additional capital gains if AMZN goes on a run.
I also had a cash-secured put (CSP) on AAPL at the $195 strike assigned early to me. As AAPL has had some significant down days this week, I will patiently hold onto these 100 shares and wait—ideally only a few days—for a modest retracement before entering into a new covered call.
GOOGL Cash-Secured Put (CTL Level 1)
Expiration Date: February 16, 2024
Step 1: Have $13,500 of cash as collateral
Step 2: Sell 1 $135 strike put option (delta 0.44) for $4.55
Credit/premium received: $455 (minus fees and commission)
I am bullish on GOOGL as it appears in the bottom part of its upward trading channel. As the market is showing weakness currently, however, I decided to push my expiration date out further to February 16. The "monthly" expiration dates (i.e., the 3rd Friday of every month) also tend have higher volume and liquidity, making for narrower bid/ask spreads.
TQQQ Cash-Secured Put (CTL Level 1) (please see Caution below)
Expiration Date: February 16, 2024
Step 1: Have $4,500 of cash as collateral
Step 2: Sell 1 $45 strike put option (delta 0.41) for $2.45
Credit/premium received: $245 (minus fees and commission)
Caution: If you're not familiar with TQQQ, it's an ETF that follows the movement of the Nasdaq index fund QQQ. However, because it's 3x leveraged, it will increase or decrease 3 times the movement of QQQ. By nature, trading in leveraged ETFs can be highly volatile and isn't for everyone! I like trading TQQQ because of its much lower share price compared to QQQ, making it a more accessible way to trade in the broader Nasdaq index. Please reach out with any questions!
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
AAPL Cash-Secured Put (CTL Level 1)
Expiration Date: February 9, 2024
Step 1: Have $18,000 of cash as collateral
Step 2: Sell 1 $180 strike put option (delta 0.43) for $4.25
Credit/premium received: $425 (minus fees and commission)
I sold near-the-money (NTM) or at-the-money (ATM) contracts this week because I also have a bullish bias right now. I also see a potential support line around the $180 level.
AMZN Cash-Secured Put (CTL Level 1)
Expiration Date: February 9, 2024
Step 1: Have $14,500 of cash as collateral
Step 2: Sell 1 $145 strike put option (delta 0.46) for $5.35
Credit/premium received: $535 (minus fees and commission)
Be on the lookout: AAPL LEAPS Call (CTL Level 2)
I'm looking into AAPL LEAPS next week. We are coming towards some oversold RSI (Relative Strength Index) territory on the daily chart. We are also approaching a potential support at around the $180 level. If I see a bounce up from here next week, I'm going to purchase 1-2 LEAPS options with a delta 0.70 to 0.80, mostly likely with a December 2025 expiration date.
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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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.