Mar 36 min
by Ben Weiss, for the Call to Leap Team
Steve and I both took somewhat of a "wait and see" approach for opening new positions this week so I wanted to take the opportunity to learn and grow as a community. We'll get a little nerdy and technical for those who want to come along with me. Steve and I still made some Wheel Strategy trades and long-term purchases so keep reading to check those out too.
Talk nerdy to me...The S&P 500 and Nasdaq both notched further bullish gains this week—which is great for our overall stock portfolio, but can make selling bullish options tricky. Often, the stock market likes to "take a breather" during the first few months of the year, though we haven't seen that play out yet this year. On the below chart for SPY (a good summary for the broader US stock market), you can see the upward trading channel is narrowing, or "consolidating" some. Also, the current trading price of $512 is butting up against the upward channel bound that I've drawn.
Steve and I often like use a technical analysis indicator called "Bollinger Bands" as one (but not the only) tool to gauge whether a stock or index may be overbought (potentially bearish ahead) or oversold (potentially bullish ahead). I do not claim to be an expert in technical analysis or Bollinger Bands specifically, but I love to learn!
I've learned the indicator can be used to show a stock's recent high and low price extremes as well as its current volatility. Under normal trading conditions, the stock price likes to stay within the bands, which represent 2 standard deviations of distribution or about 95% of the stock's recent price movement. If the price passes above the upper band or below the lower band, this could indicate an upcoming price reversal. Wider Bollinger Bands also indicate a period of greater volatility, which are often followed by periods of lower volatility, and vice versa. Learn more about Bollinger Bands here and check out the SPY below with the bands added in.
Do you agree with my opinion that SPY is "riding high" or do you see a different outlook? Lets chat on Discord!
So, what's our next move?...Many of the favorite stocks we like to trade with the Wheel Strategy like AMZN and AMD continue to advance sharply, while others like AAPL and GOOGL have been lagging behind the broader market lately. Those lagging may offer new bullish opportunities coming up, so Steve and I are waiting to see if they find bottom support from declining further. Check out these AAPL and GOOGL charts with Bollinger Bands plus horizontal (AAPL) and channel (GOOGL) support lines to see if you agree with our thinking.
AAPL
GOOGL
Ben’s trades this week
Eyes on the prize...Just because I didn't open any new positions this week doesn't mean I didn't keep my wheels going! I had sold a GOOGL cash-secured put (CSP) at the $145 strike that was expiring March 15 (about 10 days let to expiration). With GOOGL declining well below $140, my put option was increasingly in the money (ITM) and at risk of early assignment. So I decided to buy back and roll out (BBRO) the put option to the April 5 expiration date to give it more time to be right and receive additional premium in the process. I see a good chance GOOGL could rebound up in the next few weeks. If it doesn't, I'll look for further opportunities to roll the put out in time and down in strike price.
Like Steve teaches, I would also be ok with option assignment because I am bullish on GOOGL long-term and I could then sell covered calls against my new 100 shares. However, the stock doesn't pay a dividend so I am less incentivized to hold their shares and more interested to sell bullish puts, given the choice.
On another level...I also bought to close the rest of my TQQQ puts as the leveraged ETF continues to climb with the Nasdaq reaching record highs. I'll look to reopen a new position next week as I've enjoying consistently trading options in TQQQ in various market conditions. I'll be interested to see if the Nasdaq moves to correct downward its given recent sharp increases. Check out the chart below, again with Bollinger Bands, showing what looks to me like an overbought scenario. What do you think?
I've got the power...Based off the great recommendation from Steve and lots of folks in the CTL community, I recently signed up for budgeting app Empower to get a better dashboard picture of all my various accounts and I've really been enjoying it so far. While I won't be using the app to invest or trade stocks and options directly, the insights I gain into how I'm spending and earning will certainly pay dividends 😉 So far the interface on desktop and mobile is very intuitive and user friendly and I'm excited to dig deeper. If you'd like to give Empower a try, click here to check it out!
Investing like clockwork...As always, I held true to the dollar-cost average (DCA) method and bought a share each of SPY, QQQ, SCHD. 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 every week regardless of the market's movement to keep me on track long term.
Steve's trades this week
In it for the long haul...Like Ben, I chose to wait and see before opening new options positions this week. I did, nevertheless, continue on my investment journey and added 2 shares each to my long-term positions in ETFs including SPY, QQQ, and SCHD and stocks including MSFT, WM, MA, V, WMT, AMZN, and COST. Investing is a marathon, not a sprint! Slow and steady investing will win the race 🙂
As always, tweak these positions to whatever you feel comfortable with and fits your risk tolerance.
You got this, everyone! Stay disciplined, pay yourself first, and always invest in your greatest asset—yourself. 🙌🏻
- Ben and Steve
Friendly reminders from Steve:
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I'm also getting nearly 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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