Membership Positions - April 25, 2021

Hey Everyone!

It looks like President Biden proposed higher capital gain taxes this week, which in turn triggered some selling in the markets on Thursday. However, markets shrugged off the news and rose back sharply on Friday, ending the week in the green.

Here's a snapshot of how the overall markets did this week:

Trade of the Week:

If your covered calls expired worthless this Friday, we recommend selling more calls at around the same strike price as before to collect more premium. If your cash-secured puts expired worthless, you can consider restarting your Wheel by selling another cash-secured put with an OTM strike price.

Pay attention to the delta: You can always look at the delta of the call you are selling since the delta roughly approximates the probability of the price of the stock reaching the strike by expiration. If you see that the delta is 0.10, you know that there is roughly a 10% chance that the price of the stock will reach that strike price by expiration. Likewise, if you see that the delta is 0.20, you know that there is roughly a 20% chance that the price of the stock will reach that strike price by expiration.

If you're a beginner, we recommend you starting off with selling cash-secured puts around 1-3 strikes OTM. This is typically a conservative starting point when starting the Wheel Strategy. If you have been using the Wheel Strategy for a while and have a more bullish outlook, we recommend starting your new Wheel by selling a covered call around 1-3 strikes OTM to not only receive the premium, but also make capital gains if you are called away at expiration.

Here are some trade recommendations and see what fits your personal risk-tolerance:

MSFT:

Monday Open:$260.19

Friday Close:$261.15

Change: 0.37%

Starting a New Wheel: Selling a Cash-Secured Put on MSFT

- MSFT's Current Price: $261.15

- Capital needed: $26,000.00

- Sell at the Expiration Date: 2021-05-21

- Select the Strike: $260.00

- Premium you'll receive: $642.50

- Cost basis: $260.00 - $6.42 = $253.57

Starting a New Wheel: Selling a Covered Call on MSFT

- MSFT's Current Price: $261.15

- Capital needed: $26,115.00

- Sell at the Expiration Date: 2021-05-21

- Select the Strike: $262.50

- Premium you'll receive: $582.50

- Cost basis: $261.15 - $5.82 = $255.32

AAPL:

Monday Open:$133.51

Friday Close:$134.32

Change: 0.61%

Starting a New Wheel: Selling a Cash-Secured Put on AAPL

- AAPL's Current Price: $134.32

- Capital needed: $13,400.00

- Sell at the Expiration Date: 2021-05-21

- Select the Strike: $134.00

- Premium you'll receive: $437.50

- Cost basis: $134.00 - $4.38 = $129.62

Starting a New Wheel: Selling a Covered Call on AAPL

- AAPL's Current Price: $134.32

- Capital needed: $13,432.00

- Sell at the Expiration Date: 2021-05-21

- Select the Strike: $135.00

- Premium you'll receive: $405.00

- Cost basis: $134.32 - $4.05 = $130.27

AMD:

Monday Open:$82.13

Friday Close:$82.76

Change: 0.77%

Starting a New Wheel: Selling a Cash-Secured Put on AMD

- AMD's Current Price: $82.76

- Capital needed: $8,250.00

- Sell at the Expiration Date: 2021-05-21

- Select the Strike: $82.50

- Premium you'll receive: $395.00

- Cost basis: $82.50 - $3.95 = $78.55

Starting a New Wheel: Selling a Covered Call on AMD

- AMD's Current Price: $82.76

- Capital needed: $8,276.00

- Sell at the Expiration Date: 2021-05-21

- Select the Strike: $83.00

- Premium you'll receive: $402.50

- Cost basis: $82.76 - $4.03 = $78.73

NKE:

Monday Open:$134.30

Friday Close:$130.19

Change: -3.06%

Starting a New Wheel: Selling a Cash-Secured Put on NKE

- NKE's Current Price: $130.19

- Capital needed: $13,000.00

- Sell at the Expiration Date: 2021-05-21

- Select the Strike: $130.00

- Premium you'll receive: $312.50

- Cost basis: $130.00 - $3.12 = $126.88

Starting a New Wheel: Selling a Covered Call on NKE

- NKE's Current Price: $130.19

- Capital needed: $13,019.00

- Sell at the Expiration Date: 2021-05-21

- Select the Strike: $131.00

- Premium you'll receive: $286.00

- Cost basis: $130.19 - $2.86 = $127.33

PINS:

Monday Open:$75.60

Friday Close:$74.99

Change: -0.81%

Starting a New Wheel: Selling a Cash-Secured Put on PINS

- PINS's Current Price: $74.99

- Capital needed: $7,450.00

- Sell at the Expiration Date: 2021-05-21

- Select the Strike: $74.50

- Premium you'll receive: $582.50

- Cost basis: $74.50 - $5.83 = $68.67

Starting a New Wheel: Selling a Covered Call on PINS

- PINS's Current Price: $74.99

- Capital needed: $7,499.00

- Sell at the Expiration Date: 2021-05-21

- Select the Strike: $75.00

- Premium you'll receive: $615.00

- Cost basis: $74.99 - $6.15 = $68.84

Semi-Conductor Showdown

On Thursday, Intel INTC reported earnings and said its highly profitable business of selling chips to data-center customers had its worst quarter in a year, with revenue dropping an unexpected 20%, which included a 14% drop in average selling prices. Yikes!

With the drop in stock price, we saw other competitive chip makers, like AMD and NVDA, rise. These companies are potentially taking away market share away from INTC. What this means is that large institutions are pulling their money out of INTC and reallocating it into AMD and NVDA.

Are You Ready For The Next Exam? 📄

Speaking of potential future pullbacks, if you are a Premium Member, have you been studying your Level 3 material? Since it looks like we might be running a little bit high, there MIGHT be a chance that we have another pullback or start trending neutrally in the broad markets. Remember that the stock market is easily spooked with news. If there is any news about taxes or inflation, the stock market typically will have a wild reaction to it. Again, this is just a little hunch and I could be totally wrong. I'm just basing this off of the technical charts of SPY where it hit its top resistance line and the RSI is hovering around the 70's.

This isn't meant to scare you or to have you "time the markets", but to prepare your emotions and skill. If a sell-off or consolidation does happen, you can consider using some of our Level 3 strategies, specifically with setting up bear call spreads. And to answer your question, yes, you can make money when stocks go down or neutral. 😉

Also, since earnings are coming up, IV is increasing, meaning that it may be a good environment to be options sellers.

If you're investing for the long-term, this temporary pullback or consolidation shouldn't mean that much to you. Remember that pullbacks and corrections are totally normal in the markets and it's more important to look at the long-term trend.

It might be wise to have a little cash on side at all time just in case there is a little discount in the future. 🙂

What is my Bias?

At Call to Leap, we believe that the stock market will continue to rise in the long term, as long as companies are fundamentally progressing and making increasing revenue. This is why we like to continuously fund our accounts each month and buy and hold stocks for growing our long-term wealth. This is also why we like to trade LEAPS options to exponentially grow a portion of our portfolios.

However, we understand that news and other geopolitical events can often cause short-term market fluctuations. This is why we like to sell short-term options (covered calls and cash-secured puts) and set up short term bear call spreads to capitalize the market when stocks trend sideways.

The longer you invest and trade, the easier you'll see all these puzzle pieces come together and understand why using the methods we teach work in the long-run. 👍

Earnings

That's right folks! We have earnings coming up as we approach the end of April, so make sure to be on the look out to see which companies did well, and which ones didn't. We want to make sure that the companies we invest in continue to have strong business models and have increasing revenue over time.

IV is getting a little higher as we near these earnings date. If you want to continue your Wheels, you can. However, keep in mind that there may be some wild price fluctuations in the coming days. If you don't like the volatility, you can sit out with starting your Wheels and wait to see which companies did well.

Here are some earnings to watch out for next week:

Tuesday, April 27

AMD

MSFT

GOOG

SBUX

PINS

Wednesday, April 28

AAPL

Thursday, April 29

AMZN

Join Our Discord 💬

Investing, trading, and building wealth was a lonely journey for me. This is why my team and I created a Discord group for you and the other members to shares ideas and support one another. You don't have to go through it alone as we're all here to help. 😉

Make sure to check it out on the bottom of your "Dashboard" and follow the instructions on how to sign up. 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.

Level 1 FAQ 🙋‍♂️🙋‍♀️

Have questions? Before asking me and my team, feel free to check out our Level 1 FAQ. This FAQ is located on the Level 1 page. You might find what you're looking for. 😊

If you do have questions, make sure to ask them in our Level 1, 2, or 3 page, rather than asking us via email.

We also encourage you to watch all of the core video content and some of the past archived videos, read past Membership Positions, and take all the quizzes before sending us your questions.

Have a great weekend and keep an eye out on earnings this week!

-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.