🔒 Membership Positions - January 16, 2022

Hi Wealth Builders!

We had another rocky week. Let's see what happened:

Here's SPY:

Here's QQQ:

Here's DIA:

Technical Analysis 📈📉

SPY:

As we anticipated, SPY hit its orange support line this week. Because of all the fears from the Federal Reserve and Wall Street waiting for January earnings, it's totally possible that we might break the support line and consolidate sideways. For me, I did add some shares at this level to my long-term holds.

QQQ:

Tech stocks took another hit this week as QQQ finally broke its support line. Like SPY, I believe we may be trending sideways for now.

DIA:

DIA is still near its ATH right now as institutions seem to be holding their positions in DOW components.

SBUX:

SBUX broke down its $106 support line this week. If you have Wheels on this stock, you can consider selling 4-6 week OTM calls around your cost basis.

NKE:

NKE also had a drop and is now retesting the $147 level. We will have to wait for the next couple of days to see if this support level holds. If you have Wheels on this stock, you can consider selling 4-6 week OTM calls around your cost basis.

MSFT:

We also anticipated that MSFT would touch it's upward trending support line. Again, let's be patient and see how this stock reacts in the next couple of days. For me, I did add a couple of shares at this level for my long-term positions.

AMD:

Though we had a bounce back up this week, AMD is still in an overall short-term trend.

AAPL:

Surprisingly, AAPL is still holding up very well. I am still spinning my Wheels with this one.

MA:

MA had a volatile move this week with it dropping way below its purple support line, but finishing right back on top. I do want to see it break the yellow resistance line before adding more shares.

I also want to see V break out of its yellow resistance line before adding more shares.

Trade of the Week:

I currently do not recommend starting any new positions on any Wheels this week, especially with the uncertainty lingering around interest rates, inflation, and having earnings in the next couple of weeks. However, if you already own previous Wheels, you can continue to lower your cost basis by selling 4-6 week OTM calls.

If you are a Premium Member, you can consider pairing your Wheels with some bear call spreads, which is what we've been doing over the past several weeks.

Ask Steve 💭

Let's see what some of our members asked this week. Here are the top questions we received:

Carlos

Q: Hi! I am new to all this. Your Level 1 training for video "Getting Started and Allocation" stated that if you do not have $10,000 to not start selling covered calls yet. With that said, should I wait until one of the stocks that I buy gets 100 shares and then start selling covered calls? Or wait until my portfolio has $10,000 in value?

A: If you only have this much, it is typically not recommended as your entire portfolio would be composed of one stock. However, it is completely up to you and your risk tolerance. Some members may decide they want to do the wheel outright, while others might want to slowly scale into their positions until they have 100 stocks. It all comes down to what you're comfortable with and knowing your risk tolerance.

Right now, we may recommend that you focus more on investing for the long-term and to be disciplined in depositing money into your account every week or month.

Junie

Q: Hi Steve, I finally got my account up and running and am ready to start my first real wheel. Definitely starting with selling a cash secured put since I don't own 100 shares of any. Say I would like to start w AAPL. Does this mean I should start by depositing an amt about 100 shares worth before placing an order? That is about $17000?

A: This is wonderful news! Congratulations! If you want to sell a CSP, you are required to have enough funds to cover 100 shares of a company. For example, if AAPL is trading at $175 and you want to sell a CSP at the $174 strike, you'll need to have $17,400. When you sell a cash-secured put, you brokerage will hold this cash as collateral for the duration of the contract. Consider depositing a little more than what AAPL is currently worth so it can give you some "wiggle room" just incase the price fluctuates. To sell a CSP, we need to have the funds cleared in our brokerage accounts. Please let us know if you need further clarifications or if you have any additional questions! Keep up the great work Junie!

Jodie

Q: I have been doing some paper trading to learn the wheel strategy. Last week, 1/2, I placed a simulated trade for a cash secured put on Microsoft for the $335 strike price and received a premium of $573, making my cost basis $329.27. This week Microsoft dipped to $314, which got me thinking. If it stays at this level, or goes even lower, what is the strategy? Is there a level at which you suggest buying back the put and taking a loss, so as not to be assigned the shares? If I were to be assigned the shares (and assuming the stock stays around this level), then I would imagine that I cannot sell a covered call one strike OTM, because if I were to be exercised then I would have to sell all 100 shares at a loss. In this case, do you recommend selling calls several strikes further OTM until the stock retraces? And do you have a recommendation for keeping track of cost basis and trades? I can see how this would get difficult to manage when you have multiple wheels going over time.

A: In this event, you can either "buy back and roll out" (covered in our modules) or get assigned. If you are assigned, we recommend selling a covered call at the price you were assigned at ($335). Due to the wide price fluctuation and selling a covered call very far OTM, you would just receive less premium on your covered call as you wait for MSFT to retrace. With multiple wheels going, your average cost might be lower than $335. Perhaps your average cost per share is $320 and therefore, you can consider selling a covered call at/above your cost basis. Because this is closer to $314, the premium should be higher than selling at $335. We typically don't like selling below our cost basis. You can consider manually checking your cost basis by dividing your total cost of shares by the number of shares you have.

Of course! We have a "wheel strategy option spreadsheet" which can be found under our resources on our website. Please let us know if you are able to access this and if you have any additional questions. Great job practicing!

Submit Your Questions 🙋‍♂️🙋‍♀️

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

If you do have questions, make sure to ask them on our Dashboard, 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.

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.

Stay Disciplined and Patient ✊

As long term investors, it's important to be disciplined and patient. Remember that I usually recommend having at least 30% of your portfolio in steady dividend paying stocks and ETFs, like WM, COST, MSFT, AAPL, V, SPY, and DIA. If you are overweight in many growth tech stocks and saw your portfolio drop significantly over the past several weeks, you can use this as a learning opportunity for the future. Be mindful that tech growth stocks that don't pay a dividend often drop the fastest when there is uncertainty in the markets. Why? When there is uncertainty, many institutions have a "flight to quality" and feel more comfortable with holding stocks that have shown maturity and consistency over time. If a dividend-paying stock has a $1 dividend payout and an institution has 1 million shares, they get paid $1 million just for holding onto the shares, regardless of the markets being in a pullback or correction. This gives institutions a high incentive of holding onto these companies, while selling off and taking profits from growth stocks that have made tremendous gains already.

Remember that it's important to have balance in your portfolio, so we are able to endure different times in the market. If you have been following me for a while, you know that I like to have a 30/30/30/10 allocation.

Lastly, remember to practice patience. Many of us who are new the markets see stocks like food at a buffet. We load up our plates with mountains of food and guess what happens? We sometimes get a stomachache. I usually recommend to SLOWLY add positions into our portfolio. When we slowly scale in, we are able to average into the price of the shares and it incrementally develops our risk tolerance.

Stay patient and keep your eyes peeled for the next couple of weeks when we enter earnings season. Let's see how Wall Street reacts to these reports.

I'm proud of you! Keep it up! 😀👍

-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.