Hey Investors and Traders!
Don't you just love waking up and seeing an ocean of red in your portfolio? This week was the 4th worst week for the S&P 500 so far this year. It was the worst since the week of March 16, 2020. Eesh!
Here are some notable price movements in the stocks we're trading:
Advanced Micro Devices AMD
Monday Open: $82.55
Friday Close: $75.29
Microsoft MSFT
Monday Open: $213.85
Friday Close: $202.47
Apple AAPL
Monday Open: $114.01
Friday Close: $108.86
Trade of the Week:
Share Assignment
Many of you sold cash-secured puts on AMD around the $80 strike, MSFT at the $205 strike, and AAPL at the $113 strike, around a month ago, and you were assigned the 100 shares this past Friday. You should have received between $495-745 of premium per contract to lower your cost basis of owning the shares. You can check out this trade from our October 4, Membership Positions here.
Since you now own the shares, you can consider selling at the same AMD $80 strike, MSFT $205 strike, and AAPL $113 strike on the December 4th expiration date.
If you want to be more conservative and have a more bearish outlook, you can also sell 5-6 weeks out to collect more premium due to the larger extrinsic value.
Starting a New Wheel:
If you want to be more conservative with your trades, you can start another Wheel by selling cash-secured puts. We are recommending that you sell 2 strikes OTM on the December 4th expiration date.
If you have more of a bullish standpoint, you can start another Wheel by buying 100 shares and selling a covered call 1 strike OTM on the December 4th expiration date. If you choose to enter the Wheel with this strategy, note that you will also receive an additional capital gain from buying 100 shares and selling them at a higher price if you are called away on expiration.
Below are some recommendations you can consider for tomorrow.
Starting a New Wheel: Selling a Cash-Secured Put on MSFT
- MSFT's Current Price: $202.47
- Capital needed: $19,750.00
- Sell at the Expiration Date: 2020-12-04
- Select the Strike: $197.50
- Premium you'll receive: $750.00
- Cost basis: $197.50 - $7.50 = $190.00
Starting a New Wheel: Selling a Covered Call on MSFT
- MSFT's Current Price: $202.47
- Capital needed: $20,247.00
- Buy 100 shares
- Sell at the Expiration Date: 2020-12-04
- Select the Strike: $205.00
- Premium you'll receive: $845.00
- Cost basis: $202.47 - $8.45 = $194.02
Starting a New Wheel: Selling a Cash-Secured Put on AAPL
- AAPL's Current Price: $108.86
- Capital needed: $10,700.00
- Sell at the Expiration Date: 2020-12-04
- Select the Strike: $107.00
- Premium you'll receive: $482.50
- Cost basis: $107.00 - $4.83 = $102.17
Starting a New Wheel: Selling a Covered Call on AAPL
- AAPL's Current Price: $108.86
- Capital needed: $10,886.00
- Buy 100 shares
- Sell at the Expiration Date: 2020-12-04
- Select the Strike: $110.00
- Premium you'll receive: $517.50
- Cost basis: $108.86 - $5.17 = $103.69
Starting a New Wheel: Selling a Cash-Secured Put on AMD
- AMD's Current Price: $75.29
- Capital needed: $7,450.00
- Sell at the Expiration Date: 2020-12-04
- Select the Strike: $74.50
- Premium you'll receive: $432.50
- Cost basis: $74.50 - $4.33 = $70.17
Starting a New Wheel: Selling a Covered Call on AMD
- AMD's Current Price: $75.29
- Capital needed: $7,529.00
- Buy 100 shares
- Sell at the Expiration Date: 2020-12-04
- Select the Strike: $76.00
- Premium you'll receive: $452.50
- Cost basis: $75.29 - $4.53 = $70.77
Earnings, Earnings, Earnings:
Microsoft MSFT, Advanced Micro Devices AMD, and Apple AAPL delivered great reports this past week. Microsoft reported amazing growth in their cloud computing and digital businesses due to the pandemic forcing people to work more remotely at home. AMD also reported that they'll be buying Xilinx, so they can expand their territory in data centers and 5G tech. Apple got an amazing increase in Mac sales because, you know, COVID. The company did get a bit of a slap in the face because they reported a decline in their iPhone sales. However, it may be due to them delaying their newest iPhone 12 release, which made it so that the company couldn't include the pre-sale orders and purchasing forecast into their report.
These three companies are still a worthy BUY at Call to Leap.
If you haven't done so already, go ahead and check out our Earnings Recap video we posted this week. We give a little breakdown of how much money in each category these companies made.
Future Earnings:
PayPal PYPL | November 2
Waste Management WM | November 2
Square SQ | November 5
Final Thoughts:
We know, we know. We sound like naggy parents by saying the same thing over and over, but please invest conservatively or you can always consider leaving some cash on the side! It's never a good time to buy penny stocks or over-hyped IPOs with no historical positive revenue evidence. These are the stocks that will burn you, especially now that we are in a time of uncertainty.
When building your positions, we often recommend our members to invest when the price of the shares go up 5-10% from their initial position purchase. This discipline is to help prevent members from overinvesting and to help invest in an upwards trend. We encourage members to have the stock prices come to them and have Smart Money prove to them that they are pouring their money back into the stock again.
I know it feels like this correction is going on forever and that your portfolio will never go back up. However, it is important to stay optimistic and understand that you are building wealth for the long-term. If you noticed this week, we've been getting strong earnings from a lot of the companies we are investing in, which means that Smart Money is about to drive these companies higher in the coming weeks. Also, the election is coming up in 2 more days, which will take away some of the uncertainty in the air!
But you may also be thinking, but what about the virus? If our country is able to endure all the crazy events that happened in the past, like the Dot Com Bubble, the Financial Crisis, and 9/11, we are positive that our country will be able to find a way to fight this virus and build back our economy.
And also, if you haven't voted yet, go do it now! No matter who you are voting for, it is important that your voice gets heard! 👍
Stay healthy and optimistic because we see great things happening and the markets rising in the near future! 😎
- 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.