Hi Everyone!
SPY and DIA dropped as a whole this week! However, many tech stocks in the QQQ made a record high!
Here's a snapshot of the overall markets:
Here's SPY:
Here's DIA:
Here's QQQ:
Looking at the daily RSI for SPY and DIA, it looks a little oversold. Perhaps it might be a buying opportunity?
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 you were assigned your 100 shares from your cash-secured put, you can sell a call against your shares and convert your trade into a covered call trade.
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.
NKE: Be more cautious with trading NKE right now since their earnings are coming up soon. IV is high, meaning that there might be some wild price swings when they deliver their quarterly reports. For me, I think NKE has pulled back for quite some time and is ready to rally back up. There may be a chance that their report serve as a catalyst to spark a rally in the stock.
Here are some trade recommendations and see what fits your personal risk-tolerance:
MSFT:
Monday Open:$257.90
Friday Close:$259.43
Change: 0.59%
Starting a New Wheel: Selling a Cash-Secured Put on MSFT
- MSFT's Current Price: $259.43
- Capital needed: $25,500.00
- Sell at the Expiration Date: 2021-07-16
- Select the Strike: $255.00
- Premium you'll receive: $370.00
- Cost basis: $255.00 - $3.70 = $251.30
Starting a New Wheel: Selling a Covered Call on MSFT
- MSFT's Current Price: $259.43
- Capital needed: $25,943.00
- Sell at the Expiration Date: 2021-07-16
- Select the Strike: $260.00
- Premium you'll receive: $505.00
- Cost basis: $259.43 - $5.05 = $254.38
AAPL:
Monday Open:$127.82
Friday Close:$130.46
Change: 2.07%
Starting a New Wheel: Selling a Cash-Secured Put on AAPL
- AAPL's Current Price: $130.46
- Capital needed: $13,000.00
- Sell at the Expiration Date: 2021-07-16
- Select the Strike: $130.00
- Premium you'll receive: $289.00
- Cost basis: $130.00 - $2.89 = $127.11
Starting a New Wheel: Selling a Covered Call on AAPL
- AAPL's Current Price: $130.46
- Capital needed: $13,046.00
- Sell at the Expiration Date: 2021-07-16
- Select the Strike: $135.00
- Premium you'll receive: $128.50
- Cost basis: $130.46 - $1.29 = $129.18
AMD:
Monday Open:$81.51
Friday Close:$84.65
Change: 3.85%
Starting a New Wheel: Selling a Cash-Secured Put on AMD
- AMD's Current Price: $84.65
- Capital needed: $8,250.00
- Sell at the Expiration Date: 2021-07-16
- Select the Strike: $82.50
- Premium you'll receive: $206.50
- Cost basis: $82.50 - $2.06 = $80.44
Starting a New Wheel: Selling a Covered Call on AMD
- AMD's Current Price: $84.65
- Capital needed: $8,465.00
- Sell at the Expiration Date: 2021-07-16
- Select the Strike: $85.00
- Premium you'll receive: $289.50
- Cost basis: $84.65 - $2.90 = $81.76
NKE:
Monday Open:$131.70
Friday Close:$128.41
Change: -2.5%
Starting a New Wheel: Selling a Cash-Secured Put on NKE
- NKE's Current Price: $128.41
- Capital needed: $12,500.00
- Sell at the Expiration Date: 2021-07-16
- Select the Strike: $125.00
- Premium you'll receive: $287.50
- Cost basis: $125.00 - $2.88 = $122.12
Starting a New Wheel: Selling a Covered Call on NKE
- NKE's Current Price: $128.41
- Capital needed: $12,841.00
- Sell at the Expiration Date: 2021-07-16
- Select the Strike: $130.00
- Premium you'll receive: $372.50
- Cost basis: $128.41 - $3.72 = $124.69
PINS:
Monday Open:$68.50
Friday Close:$74.19
Change: 8.31%
Starting a New Wheel: Selling a Cash-Secured Put on PINS
- PINS's Current Price: $74.19
- Capital needed: $7,000.00
- Sell at the Expiration Date: 2021-07-16
- Select the Strike: $70.00
- Premium you'll receive: $180.00
- Cost basis: $70.00 - $1.80 = $68.20
Starting a New Wheel: Selling a Covered Call on PINS
- PINS's Current Price: $74.19
- Capital needed: $7,419.00
- Sell at the Expiration Date: 2021-07-16
- Select the Strike: $75.00
- Premium you'll receive: $320.00
- Cost basis: $74.19 - $3.20 = $70.99
SBUX:
Monday Open:$112.78
Friday Close:$109.70
Change: -2.73%
Starting a New Wheel: Selling a Cash-Secured Put on SBUX
- SBUX's Current Price: $109.70
- Capital needed: $10,500.00
- Sell at the Expiration Date: 2021-07-16
- Select the Strike: $105.00
- Premium you'll receive: $87.00
- Cost basis: $105.00 - $0.87 = $104.13
Starting a New Wheel: Selling a Covered Call on SBUX
- SBUX's Current Price: $109.70
- Capital needed: $10,970.00
- Sell at the Expiration Date: 2021-07-16
- Select the Strike: $110.00
- Premium you'll receive: $226.50
- Cost basis: $109.70 - $2.26 = $107.44
ADBE Earnings:
Adobe hit new records on Thursday afternoon after reporting a strong second quarter due to their strength of cloud software.
ADBE reported net income of $1.12 billion compared with $1.1 billion in the year-ago period. Revenue rose to $3.84 billion from $3.13 billion in the year-ago quarter. Many analysts forecasted revenue of $3.73 billion.
The company said that their revenue from their Digital Media, Creative, and DocumentCloud products grew 25%, 24% and 30% respectively year-over-year. The company also said it had a record $1.99 billion in cash flows from operations.
If you don't know already, ADBE sells their digital products and subscriptions, such as Photoshop, Premiere, and Illustrator, all of which are products my team and I use on a regular basis. And due to the growing trend of digital media, we see these products being used even more in the future.
Here's a chart of ADBE over the past 5 years:
I don't know about you, but that looks pretty good!
We are still bullish on ADBE in the long-term and recommend this stock. If you want to invest in this company, make sure that it fits your risk tolerance and only add a little bit of shares at a time. This stock is still considered pretty volatile and can drop quickly from any signs of negative news.
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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.
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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.
Rising Interest Rates
This week, the Federal Reserve raised its expectations for inflation this year and fast forwarded the time frame on when interest rates will rise.
The Federal Reserve raised its inflation expectation to 3.4%, which is a full percentage point higher than the March projection. The Fed also stated that their position on inflation pressures are “transitory.”
Looking at the markets this week, it looked like the broad S&P500 and DOW30 index fell due to the news. However, tech stocks like MSFT, PINS, AMD, and AAPL, continued to move higher. Some of these stock even broke out of their previous resistance lines. There may be a chance that there is a rotation going on and some of the institutional money is going back into the tech stocks that have been stagnant for the past couple of months. I would still be cautious though since some of RSI for these stocks are running high. We also know that with rising interest rates, it affects many businesses since it costs a little more to borrow money.
If you're a Premium Member and trading the Wheel, we recommend setting up some bear call spreads in combination to selling your covered calls just to be on the safe side.
If you're investing for the long-term, honestly, there's really not much to worry about. Just stick to the plan and keep investing, little by little, in companies with strong fundamentals.
Stay disciplined and patient! Have a wonderful weekend! 😀
-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.