🔒 Membership Positions - January 2, 2022

Happy New Year Wealth Builders!

We finished off strong this year with double digits in the major indices. Let's take a look:

SPY ended the year with a 27.85% gain:

QQQ ended the year with a 27.23% gain:

DIA ended the year with a 19.63% gain:

If you've been disciplined with investing in these ETFs little by little over time, congratulations to you! Isn't it wonderful to see the power of investing in your actual accounts?

January Earnings

Time flies and yes, we are heading into earnings once again. Many of our favorite companies will be delivering their numbers in the next 30 days. Please be mindful of the earnings dates for your favorite companies as there may be some volatility towards the end of this month.

Technical Analysis 📈📉

SPY:

Woohoo! After 8 weeks of sideways movement, SPY finally broke out of our $470 level this week! I will be adding more shares to my long-term holds.

QQQ:

QQQ barely moved again and got rejected at the $405 level. This is to be expected as many large institutions typically do a little reallocation and move to value stocks during the last weeks of the year before closing their books. If the markets are not bombarded with too many negative news and fend well against the Federal Reserve raising interest rates this year, I believe that many growth tech stocks will start to move once again.

AAPL:

AAPL is still near its ATHs and has been trending sideways for the last four weeks. I am still spinning the Wheel.

AMD:

AMD is still a rollercoaster with it rising to around $156 and dropping back down to $143. The premiums are especially high for this stock, but there is greater risk with it dropping as it doesn't pay a dividend and is in the semi-conductor space. I wouldn't go too crazy with spinning the Wheel on this one.

MSFT:

Now that we have a little more data, we can see that MSFT has a short-term resistance line denoted in orange. The stock will have to wedge out soon as it has to decide if it wants to break out or fall below the support line.

NKE:

Similarly, NKE also has a strong short-term resistance line denoted in purple and will wedge out soon.

SBUX:

SBUX is still caught between $106 and $116 is one of my favorite stocks to spin the Wheel on since it's relatively less expensive and is trending sideways. I know that many of you have multiple staggered Wheels on this stock and it has been very easy to get in and out at around the same price.

V has been on a strong retracement and is retesting the 200 EMA. I am planning on slowly buying a couple of shares this week.

MA:

The same goes with MA.

EL:

EL has been one of my favorite long-term holds for this year as it's just a steady Eddy going up.

COST:

I'm also still adding more shares to COST, especially that it hit another ATH this week.

WM:

WM has again been climbing to another ATH. I'm planning on adding more shares this week.

FB:

FB broke out of its resistance line this week. I'm going to see if the stock holds above it before I scale in my position.

DIS:

Alright, I do feel a little safer with slowly adding more shares of DIS at this level. There has been higher highs and higher lows made over the past 5 weeks.

Trade of the Week:

Spinning your wheels: 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 shares were called away last week, you can consider restarting your wheel. For beginners, you can consider starting again by selling a cash-secured put, around 1-3 strikes OTM (or for a lower 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.

Keep It Balanced: Just as a friendly reminder, we recommend to not go overboard with growth stocks, like AMD, for your Wheels. Yes, they do have high premiums and they are relatively less expensive compared to AAPL, NKE, SBUX, and MSFT. However, just keep in mind that stocks that don't pay a dividend and have high premiums/IV typically drop the fastest when there is uncertainty in the markets. If you are brand new to starting the Wheel, we recommend starting off with AAPL, NKE, SBUX, or MSFT. Please also be mindful that we recommend adhering to the 30/30/30/10 allocation.

Extra Shares On The Side: As I mentioned before in the previous weeks, you can always keep some extra shares on the side in case your favorite stock runs past your strike price. So instead of purchasing 100 share and selling a covered call, you can purchase 125 shares. You can also buy 25 extra shares and sell a cash-secured put. This way, you will have an extra 25 shares to gain from the potential price move up.

Earnings: Though you will notice that IV and premiums are going to increase in the next couple of weeks, please keep in mind that there may be a lot of volatility due to earnings coming out. Stocks may significantly rise or drop after an earnings announcement, so if you are a beginner and don't feel comfortable opening a new Wheel position, you can wait to do so sometime in February. If you are experienced with the Wheel Strategy, you most likely don't mind the volatility and have a higher risk tolerance.

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

MSFT Monday Open: $335.46 Friday Close: $336.32 5-day change: 0.25%

Starting a New Wheel: Selling a Cash-Secured Put on MSFT - MSFT's Current Price: $336.32 - Capital Needed: $33500.00 - Sell at the Expiration Date: 2022-01-21 - Select the Strike: $335 - Premium you'll receive: $573.00 - Cost Basis: $335.00 - $5.73 = $329.27

Starting a New Wheel: Selling a Covered Call on MSFT - MSFT's Current Price: $336.32 - Capital Needed: $33632.00 - Sell at the Expiration Date: 2022-01-21 - Select the Strike: $337.5 - Premium you'll receive: $605.00 - Cost Basis: $336.32 - $6.05 = $330.27

AAPL Monday Open: $177.09 Friday Close: $177.57 5-day change: 0.27%

Starting a New Wheel: Selling a Cash-Secured Put on AAPL - AAPL's Current Price: $177.57 - Capital Needed: $17750.00 - Sell at the Expiration Date: 2022-01-21 - Select the Strike: $177.5 - Premium you'll receive: $397.00 - Cost Basis: $177.50 - $3.97 = $173.53

Starting a New Wheel: Selling a Covered Call on AAPL - AAPL's Current Price: $177.57 - Capital Needed: $17757.00 - Sell at the Expiration Date: 2022-01-21 - Select the Strike: $180 - Premium you'll receive: $308.00 - Cost Basis: $177.57 - $3.08 = $174.49

AMD Monday Open: $147.51 Friday Close: $143.90 5-day change: -2.44%

Starting a New Wheel: Selling a Cash-Secured Put on AMD - AMD's Current Price: $143.90 - Capital Needed: $14300.00 - Sell at the Expiration Date: 2022-01-21 - Select the Strike: $143 - Premium you'll receive: $595.00 - Cost Basis: $143.00 - $5.95 = $137.05

Starting a New Wheel: Selling a Covered Call on AMD - AMD's Current Price: $143.90 - Capital Needed: $14390.00 - Sell at the Expiration Date: 2022-01-21 - Select the Strike: $144 - Premium you'll receive: $650.00 - Cost Basis: $143.90 - $6.50 = $137.40

NKE Monday Open: $166.52 Friday Close: $166.67 5-day change: 0.09%

Starting a New Wheel: Selling a Cash-Secured Put on NKE - NKE's Current Price: $166.67 - Capital Needed: $16500.00 - Sell at the Expiration Date: 2022-01-21 - Select the Strike: $165 - Premium you'll receive: $248.00 - Cost Basis: $165.00 - $2.48 = $162.52

Starting a New Wheel: Selling a Covered Call on NKE - NKE's Current Price: $166.67 - Capital Needed: $16667.00 - Sell at the Expiration Date: 2022-01-21 - Select the Strike: $167.5 - Premium you'll receive: $284.00 - Cost Basis: $166.67 - $2.84 = $163.83

SBUX Monday Open: $112.60 Friday Close: $116.97 5-day change: 3.88%

Starting a New Wheel: Selling a Cash-Secured Put on SBUX - SBUX's Current Price: $116.97 - Capital Needed: $11600.00 - Sell at the Expiration Date: 2022-01-21 - Select the Strike: $116 - Premium you'll receive: $175.00 - Cost Basis: $116.00 - $1.75 = $114.25

Starting a New Wheel: Selling a Covered Call on SBUX - SBUX's Current Price: $116.97 - Capital Needed: $11697.00 - Sell at the Expiration Date: 2022-01-21 - Select the Strike: $117 - Premium you'll receive: $217.00 - Cost Basis: $116.97 - $2.17 = $114.80

Ask Steve 💭

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

Chris

Q1. If I decide to close out a position early for a "sold put" and let's say I want to do it when I hit 90% of the premium for example... how do I go about calculating this? I use thinkorswim and just trying to understand how to calculate it?

I'll include an example in case it's easier. I have the PUT you recommended for AAPL at $170 that expires on 1/14.

Thanks so much! I understand how much the premium would be at close. I'm just confused on how I can calculate between now and then.

A: Great job Chris! Let's say you sold a cash-secured put on AAPL for $500 premium and the underlying stock rose up significantly and now you've received 90% of your premium.

To calculate 90% of $500, you would do 500 x 0.9 = $450. When you've gained $450 on your option, you can consider buying to close. The remaining $50 is what your option is now worth, which would cost you $50 to buy it back. This would lock in your $450 profit.

On Think or Swim it should tell you how much your contract is worth and how much you've gained/lost from that position.

Sarah

Q1. So I was one of the unfortunate ones to buy PINS over the summer, so I am just sitting on them hoping they recover. Is it too risky to play a covered call on them while I'm stuck holding them? Thanks.

A: We are not sure what your cost basis is, but you can consider either selling at your cost basis (if it is not too far OTM and you're still able to get premium) or if you're comfortable with taking a loss and your cost basis is very far OTM to where you're not going to receive any premium, you can consider selling below your cost basis/5-10 strikes OTM for more premium until your shares are called away. You can also consider just holding onto the shares for the long-term to not take a loss.

A few words of encouragement: Investing is a long-term game. Don't let this trade discourage you. The most important thing you can do is to maintain a positive wealth mindset. Sometimes we earn and sometimes we learn. Investing takes patience, discipline and consistency. We believe in you and financial freedom is possible! We look forward to continue working with you and helping you on your financial freedom journey. Please send us any additional questions you might have. We look forward to answering them!

Kathy

Q1. When choosing a strike price for a CSP, do you take into consideration the delta? What if the delta is negative at the time?

A: Wonderful question! To review, the delta is the "% chance" that the underlying stock will hit that strike price by expiration. When selling cash secured puts, the delta shows up as negative, but it is still the same thing. I know, it can be a little confusing at first. So for example, a delta -0.50 when selling a cash secured put has a 50% chance of hitting that price by expiration. A -0.25 has a 25% chance, etc.

To answer your question specifically, when trading the wheel, it is useful to look at the delta to see the percent chance of the underlying stock hitting that price by expiration. However, we typically sell CSPs 1 strike below whatever the underlying stock is trading for depending on market conditions. For example, if a stock is trading at $100, we can do $99. If you want to be more conservative and want to minimize the chance of having the obligation to purchase shares, you can always consider selling a CSP further OTM (more strikes below the current trading price). These would have lower deltas. However, keep in mind that the more OTM you sell, the less premium you'll receive.

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.

2022 Goals 🎯

As we enter 2022, I encourage you to recollect all the amazing things you've accomplished in 2021. Did you hit all of your goals that you wrote down? What worked and what didn't?

To be successful with anything in life, it is important that we are intentional with the steps we take in our journey. Success is intentional, not accidental, which is why we must intentionally write down goals and make sure we keep ourselves accountable with hitting them.

If you are brand new to goal-setting or have found difficulty sticking to your goals in the past, I encourage you to just start off with one or two goals. That's it. This is so you are not so overwhelmed with all the things you promise yourself you want to do.

When you write your goals, make sure to be as specific as possible. Include the time you want to reach your goal and the actionable and attainable steps you will take to get there.

For example, instead of saying, "My goal is to be rich," you can change it to, "My goal is to grow my $150,000 portfolio to $200,000 by December 31, 2022, by auto-depositing $2,000 into my brokerage account and slowly spinning the Wheel and buying stocks and ETFs every Monday morning."

Remember to keep your goals attainable. I highly do not recommend for you to make outlandish goals because if you don't hit them, it may negatively affect your mindset.

After you write your goals down on a piece of paper, I encourage you to stick it on your mirror, bedside table, or refrigerator, so you remind yourself of the path you are traveling each day. These constant reminders are what is going to fuel your car to go further and further.

Yes, you will make mistakes and hit some potholes along the way. There will be days and weeks where you might forget to pay yourself first and invest. However, know that it's okay to mess up. The most important thing is to pick yourself up and be consistent.

I want to say that my team and I are so proud of all of you. We are so thankful for all the positive messages you send us each week and you sharing with us how much you've progressed in your journey to financial freedom.

Keep up the wonderful work. You are amazing! 😀👍

-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.