🔒 Membership Positions - January 31, 2021
- Call to Leap
- Jan 30, 2021
- 7 min read
Updated: May 27, 2021
Hey Members!
Whew! What a wild week in the stock market! We had our earnings announcements for some of our favorite companies and had some drama with some retail investors and large institutional money managers getting short-squeezed out.
Yeah, it was pretty bloody for this week with the majority of the sectors finishing red. Here's an overall view of the markets.
Here are some notable price movements in the stocks we're trading:
Advanced Micro Devices AMD
Monday Open: $94.14
Friday Close: $85.64
Microsoft MSFT
Monday Open: $229.12
Friday Close: $231.96
Apple AAPL
Monday Open: $143.07
Friday Close: $131.96
Nike NKE
Monday Open: $138.99
Friday Close: $133.59
Trade of the Week:
If your covered calls expired worthless, you can sell another call against your shares at the same strike you chose last month. If you were assigned the 100 shares from your cash-secured put, you can now convert your trade into a covered call by selling at the same or 1-2 strikes above what you chose last month.
If you're a beginner, we recommend you starting off with selling cash-secured puts around 1-2 strikes OTM. This is typically a conservative starting point when starting the Wheel Strategy. However, if you're more experienced, bullish about the markets, and have been using the Wheel Strategy for some time, we recommend restarting by selling a covered call around 2-4 strikes OTM to not only receive the premium, but also make capital gains if you are called away at expiration. Some ex-dividend dates are coming up, which means that if you start a covered call, you can collect dividends for the 100 shares if you hold it past the ex-dividend date. Also note that since we had a little pullback this week, especially for AMD, AAPL, and NKE, there may be a higher likelihood that these shares will retrace in the next 30 days.
Here are some trade recommendations:
Starting a New Wheel: Selling a Cash-Secured Put on MSFT - MSFT's Current Price: $231.96 - Capital needed: $23,000.00 - Sell at the Expiration Date: 2021-02-26 - Select the Strike: $230.00 - Premium you'll receive: $767.50 - Cost basis: $230.00 - $7.67 = $222.32
Starting a New Wheel: Selling a Covered Call on MSFT - MSFT's Current Price: $231.96 - Capital needed: $23,196.00 - Sell at the Expiration Date: 2021-02-26 - Select the Strike: $232.50 - Premium you'll receive: $775.00 - Cost basis: $231.96 - $7.75 = $224.21
Starting a New Wheel: Selling a Cash-Secured Put on AMD - AMD's Current Price: $85.64 - Capital needed: $8,550.00 - Sell at the Expiration Date: 2021-02-26 - Select the Strike: $85.50 - Premium you'll receive: $505.00 - Cost basis: $85.50 - $5.05 = $80.45
Starting a New Wheel: Selling a Covered Call on AMD - AMD's Current Price: $85.64 - Capital needed: $8,564.00 - Sell at the Expiration Date: 2021-02-26 - Select the Strike: $86.00 - Premium you'll receive: $505.00 - Cost basis: $85.64 - $5.05 = $80.59
Starting a New Wheel: Selling a Cash-Secured Put on AAPL - AAPL's Current Price: $131.96 - Capital needed: $13,100.00 - Sell at the Expiration Date: 2021-02-26 - Select the Strike: $131.00 - Premium you'll receive: $612.50 - Cost basis: $131.00 - $6.12 = $124.88
Starting a New Wheel: Selling a Covered Call on AAPL - AAPL's Current Price: $131.96 - Capital needed: $13,196.00 - Sell at the Expiration Date: 2021-02-26 - Select the Strike: $132.00 - Premium you'll receive: $635.00 - Cost basis: $131.96 - $6.35 = $125.61
Starting a New Wheel: Selling a Cash-Secured Put on NKE - NKE's Current Price: $133.59 - Capital needed: $13,300.00 - Sell at the Expiration Date: 2021-02-26 - Select the Strike: $133.00 - Premium you'll receive: $412.50 - Cost basis: $133.00 - $4.12 = $128.88
Starting a New Wheel: Selling a Covered Call on NKE - NKE's Current Price: $133.59 - Capital needed: $13,359.00 - Sell at the Expiration Date: 2021-02-26 - Select the Strike: $134.00 - Premium you'll receive: $497.50 - Cost basis: $133.59 - $4.97 = $128.62
Earnings 📅
We had some great earnings reports from our favorite companies, AMD, MSFT, and AAPL this week!
AMD announced that their quarterly revenue came in at $3.2 billion, which is up 16% quarter-over-quarter and up 53% year-over-year! The company had strong sales for their Ryzen chips and their computer and graphics segment brought in $1.9 billion of revenue, which is up 18% year-over-year. Their enterprise, embedded and semi-custom segment revenue was $1.28 billion, which is a 176% year-over-year increase.
MSFT announced that their quarterly revenue came in at $43 billion, which is up 12% quarter to quarter and up 17% year-over-year. Revenue from their productivity and business processes segment was $13.4 billion, which is a 13% year-over-year increase. Revenue from their intelligent cloud segment was $14.6 billion, which is a 23% year-over-year increase. Lastly, revenue in their personal computing was $15.1 billion, which is a 14% year-over-year increase.
AAPL announced their largest quarter-to-quarter revenue of all time of $111.4 billion, which is a 21% year-over-year increase. Sales for every product category, such as their phones, computers, and digital services rose by double-digit percentage points. Their iPhone revenue came in at $65.60 billion, which is a 17% increase from the same time last year. Apple’s services business, which includes revenue from the App Store, Apple Music and Apple TV, brought in $15.7 billion, which is a 24% year-over-year increase.
Woohoo! These three companies are still fundamentally strong companies to either invest or trade in! 🥂
Got FOMO? 😲
We'll put this here again, which was written on last week's post, just because we had a lot of questions concerning what happens if a stock goes past their strike price for their Wheels.
Sometimes when we sell covered calls, our shares are called away! You might get this painful feeling in your stomach where you think you should have sold at a higher strike or if you should have just held onto the shares and not sell any calls against them. Remember that when you utilize the Wheel Strategy, your primary intention is "play hot potato" with your shares. At the end of it all, realize that you made money from the trade because you collected a premium and some capital gains. You are in the positive!
We know that there are butterflies and sunshine right now with the markets progressing forward. Many investors might think they're geniuses because they see a lot of green on their phones and laptops. However, when negative geopolitical events happen, you will be glad that you had calls sold against your shares to give you a little downside protection.
Remember that it's hard to time the markets. It's virtually impossible for you to know exactly where the price of a stock will be in the short-term, which is why we sell short-term options to bring in guaranteed premiums.
If you are really bullish on the markets, remember that you can always sell more OTM strikes. We typically recommend selling around a Delta 0.30 since you roughly have around a 30% probability of getting your shares called away if you sell a covered call. Just know that the downside to this is that the premium you receive will be much lower and will give you less downside protection in the event that a pullback or correction occurs. Selling NTM will typically give you the highest premium since extrinsic value of options are highest NTM.
Discord Launched! 💬
Make sure to check it out on the bottom of your "Dashboard" and follow the instructions on how to sign up.
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.
Discount Shopping
We usually recommend that you buy more shares when they rise 5-10% from your initial position. However, with the given drop that we had this week, we see stocks like AMD, NKE, and AAPL at a bit of a discounted price right now. If it fits your risk tolerance, you can consider picking up some shares. Again, don't go all in since some of these shares can still sell off in the near-term and we want you to be safe with protecting your capital.
Buying Into The Hype 🍋
Yeah, we know. GME, AMC, and BB had a bright spotlight on them this week and how many retail investors were pumping money into these stocks to cause a short-squeeze on these large hedge fund managers. And guess what... it worked!
Now before you get excited, we want to let you know that we highly don't encourage you to buy into these stocks, especially if you are new to the markets. Yes, we know we can't control what you do with your hard-earned money and we want to be respectful of your money decisions. However, these stocks are way too volatile and the price of these shares are only propped up because of all the hype money put into them. Once people decide to sell the shares, the price of these volatile stocks can rapidly drop.
We totally understand that many retail investors want to deliver a message to the big players in the market. Heck, we also think it's unfair for these institutions to manipulate the markets and to even prevent us from a free-trade market. However, know that in the Call to Leap Community, our goal is to be cautious with our investments and to have our ultimate goal of Financial Freedom in mind.
We want to make sure that you are wise investors and want to build wealth for the long-term. Financial Freedom doesn't come over night. It takes skill, discipline, and patience. And sometimes with this discipline, it means that we have to tune out the noise and not get distracted by shiny objects.
Stick with the game plan and stay on course because future you will thank you!
Stay patient and optimistic! Great things are coming your way! 😀
- 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.
