🔒 Membership Positions - May 30, 2021
- Call to Leap
- May 29, 2021
- 7 min read
Hi Everyone!
Yay! We had a nice rally for a lot of our favorite stocks this week!
Here's a snapshot of the overall market:
Here's a look at SPY:
And here's a look at QQQ:
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.
If you entered your Wheel on PINS or AMD at a much higher price, there are some options you can consider:
Stay patient and let the stock retrace. You can consider selling a call against your shares around 2-3 months out, rather than our typical 4-6 weeks out, at around the same price that you purchased your shares.
You can consider selling a call against your shares around 4-6 weeks out at around the bottom range of your cost basis.
You can consider selling a call against your shares around 4-6 weeks out at around 1-5 strikes below the bottom range of your cost basis. Yes, you will take a loss on your trade, but you can free up capital to move to another stock that is in favor by Wall Street. This like breaking up with your girlfriend or boyfriend. It hurts in the beginning, but you sometimes may want to move on to another person.
For me personally, I am going with options 1 and 2 and will continue to lower the cost basis of my shares, even if it might be around $50 per contract. I don't mind being patient with these stocks since I have Wheels on MSFT, AAPL, and NKE still running on the side.
Keep in mind that even though PINS and AMD have fallen pretty fast, they can also retrace back up quickly. I am still very bullish on these companies in the long-run due to their fantastic numbers.
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.
PINS and AMD
If you want to still trade the Wheel on PINS and AMD, please keep in mind that these stocks are very volatile. We may recommend selling further OTM strikes for your CSPs, around 3-6 strikes away to play it more conservatively. Or if you just want to play it safe, you can just sit this one out for now.
Here are some trade recommendations and see what fits your personal risk-tolerance:
MSFT:
Monday Open:$247.79
Friday Close:$249.68
Change: 0.76%
Starting a New Wheel: Selling a Cash-Secured Put on MSFT
- MSFT's Current Price: $249.68
- Capital needed: $24,750.00
- Sell at the Expiration Date: 2021-06-25
- Select the Strike: $247.50
- Premium you'll receive: $442.50
- Cost basis: $247.50 - $4.43 = $243.07
Starting a New Wheel: Selling a Covered Call on MSFT
- MSFT's Current Price: $249.68
- Capital needed: $24,968.00
- Sell at the Expiration Date: 2021-06-25
- Select the Strike: $250.00
- Premium you'll receive: $517.50
- Cost basis: $249.68 - $5.17 = $244.50
AAPL:
Monday Open:$126.01
Friday Close:$124.61
Change: -1.11%
Starting a New Wheel: Selling a Cash-Secured Put on AAPL
- AAPL's Current Price: $124.61
- Capital needed: $12,400.00
- Sell at the Expiration Date: 2021-06-25
- Select the Strike: $124.00
- Premium you'll receive: $260.00
- Cost basis: $124.00 - $2.60 = $121.40
Starting a New Wheel: Selling a Covered Call on AAPL
- AAPL's Current Price: $124.61
- Capital needed: $12,461.00
- Sell at the Expiration Date: 2021-06-25
- Select the Strike: $125.00
- Premium you'll receive: $278.00
- Cost basis: $124.61 - $2.78 = $121.83
AMD:
Monday Open:$77.26
Friday Close:$80.08
Change: 3.65%
Starting a New Wheel: Selling a Cash-Secured Put on AMD
- AMD's Current Price: $80.08
- Capital needed: $8,000.00
- Sell at the Expiration Date: 2021-06-25
- Select the Strike: $80.00
- Premium you'll receive: $274.50
- Cost basis: $80.00 - $2.75 = $77.25
Starting a New Wheel: Selling a Covered Call on AMD
- AMD's Current Price: $80.08
- Capital needed: $8,008.00
- Sell at the Expiration Date: 2021-06-25
- Select the Strike: $80.50
- Premium you'll receive: $258.00
- Cost basis: $80.08 - $2.58 = $77.50
NKE:
Monday Open:$132.83
Friday Close:$136.46
Change: 2.73%
Starting a New Wheel: Selling a Cash-Secured Put on NKE
- NKE's Current Price: $136.46
- Capital needed: $13,600.00
- Sell at the Expiration Date: 2021-06-25
- Select the Strike: $136.00
- Premium you'll receive: $420.00
- Cost basis: $136.00 - $4.20 = $131.80
Starting a New Wheel: Selling a Covered Call on NKE
- NKE's Current Price: $136.46
- Capital needed: $13,646.00
- Sell at the Expiration Date: 2021-06-25
- Select the Strike: $137.00
- Premium you'll receive: $425.00
- Cost basis: $136.46 - $4.25 = $132.21
PINS:
Monday Open:$61.26
Friday Close:$65.30
Change: 6.59%
Starting a New Wheel: Selling a Cash-Secured Put on PINS
- PINS's Current Price: $65.30
- Capital needed: $6,500.00
- Sell at the Expiration Date: 2021-06-25
- Select the Strike: $65.00
- Premium you'll receive: $301.50
- Cost basis: $65.00 - $3.01 = $61.98
Starting a New Wheel: Selling a Covered Call on PINS
- PINS's Current Price: $65.30
- Capital needed: $6,530.00
- Sell at the Expiration Date: 2021-06-25
- Select the Strike: $65.50
- Premium you'll receive: $305.00
- Cost basis: $65.30 - $3.05 = $62.25
SBUX:
Monday Open:$111.80
Friday Close:$113.88
Change: 1.86%
Starting a New Wheel: Selling a Cash-Secured Put on SBUX
- SBUX's Current Price: $113.88
- Capital needed: $11,300.00
- Sell at the Expiration Date: 2021-06-25
- Select the Strike: $113.00
- Premium you'll receive: $192.50
- Cost basis: $113.00 - $1.93 = $111.08
Starting a New Wheel: Selling a Covered Call on SBUX
- SBUX's Current Price: $113.88
- Capital needed: $11,388.00
- Sell at the Expiration Date: 2021-06-25
- Select the Strike: $114.00
- Premium you'll receive: $251.00
- Cost basis: $113.88 - $2.51 = $111.37
Earnings
Whoa! Let's take a look at some report cards that came out this week!
COST
Costco reported better-than-expected profit and sales for its fiscal third quarter. Nice!
The company said they earned $1.22 billion in the quarter, compared with $838 million in the year-ago quarter.
Net sales for the quarter increased to $45.3 billion from $36.45 billion a year ago. Analysts were anticipating sales of $44.7 billion.
Same-store sales rose 21%, and online sales rose 41%, the company said. At the height of pandemic-fueled stockpiling, Costco online sales soared, including a 65% jump in the third quarter of 2020.
Here's a look at COST's 5-year chart. I don't know about you, but this is a nice looking chart!
Conclusion
We believe that COST is still a great long-term investment. This company is part of the S&P500 and is mature enough to pay a dividend. Remember, company stock prices don't just go up by accident. It's because of Costco's strong revenue growth that is giving large institutions with billions of dollars reason to want to invest in them. I believe that people are going to continue their memberships and still get their groceries, supplies, and that occasional hotdog at the end of their shopping. I am personally going to be adding a little more shares to my portfolio.
As always, remember to keep a balanced portfolio with the 30/30/30/10 ratio and see if the stocks you are investing in is something you believe in and fits your own risk tolerance.
Compounding Your Portfolio
I know there is a lot of hype with investing in new things that you hear from the internet or even that weird uncle that you sometimes have dinner with. However, make sure you understand what and why you are investing. Is your goal to make a quick buck in 2-3 weeks because you hear these 18-year-olds are doing it? Or are you trying to have sustainable, predictable, and consistent growth for years to come?
If you want to compound your wealth, we recommend following these rules:
Make sure to have automatic deposits to your brokerage account and pay yourself first!
Reinvest your Wheel premiums and dividends into long-term, dividend paying stocks or growth stocks.
Wash, rinse, repeat, and be patient.
From a mathematical standpoint, if you keep churning money in your account and keep depositing a portion of your paycheck into your account, your wealth will most likely grow exponentially as time progresses. I know it's hard to see it in the beginning. However, as you continue to have these positive, wealth habits, you will start to see amazing growth sooner than you expect.
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 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.
Lastly, I just want to say how proud I am of many of you who have been keeping a balanced portfolio, tracking your premiums, and being diligent in investing in fundamentally strong companies. Keep it up. You got this!
Have a wonderful Memorial Day 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.
