Hey Investors and Traders!
It looks like we had another overall neutral week. On Tuesday, October 6, economic relief talks screeched to a halt as President Trump tweeted and ordered Treasury Secretary Steven Mnuchin to stop negotiating with House Speaker Nancy Pelosi until after the election. Markets didn't like the sound of that and reacted negatively. However, President Trump tweeted again on Wednesday and indicated he wanted Congress to approve a stand-alone bill that would authorize a second round of $1,200 checks. This tweet calmed markets and made major indices jump back up again.
Here are some notable price movements in the stocks we're trading:
Advanced Micro Devices AMD
Monday Open: $82.55
Friday Close: $83.10
Microsoft MSFT
Monday Open: $215.81
Friday Close: $207.22
Apple AAPL
Monday Open: $116.97
Friday Close: $113.91
Trade of the Week:
Expiring Options
Many of you sold cash-secured puts on AMD at the $76 strike, MSFT at the $202.50 strike, and AAPL at the $112 strike, around a month ago, and your puts expired worthless this past Friday. You should have pocketed between $480-700 of premium per contract! You can check out this trade from our September 13, Membership Positions here. If this happened, you can restart your Wheel again by entering with another cash-secured put. Woohoo!
Again, keep in mind of earnings in October. MSFT has earnings on October 27, AMD has earnings on October 27, and AAPL has earnings on October 28. If you select an expiration on or after the week of earnings, the premiums will be larger due to higher implied volatility.
Starting a New Wheel: Selling a Cash-Secured Put on AMD
AMD's Current Price: $83.10
Capital needed: $8,300
Sell at the Expiration Date: November 13, 2020
Select the Strike: $83.00 (Willing to buy the 100 shares at this price)
Premium you'll receive: $631
Cost Basis: $83.00 - $6.31 = $76.69
Note: If you want to be more conservative, you can select a strike lower than the current price. You can consider choosing the $82, $81, or $80 strike. You won't receive as much premium the further OTM you go. However, if you are assigned the 100 shares, you will be able to purchase the shares at a cheaper price.
Starting a New Wheel: Selling a Cash-Secured Put on MSFT
MSFT's Current Price: $215.81
Capital needed: $215,00
Sell at the Expiration Date: November 13, 2020
Select the Strike: $215.00 (Willing to buy the 100 shares at this price)
Premium you'll receive: $900
Cost Basis: $215.00 - $9.00 = $206.00
Note: If you want to be more conservative, you can select a strike lower than the current price. You can consider choosing the $210 or $207.50 strike. You won't receive as much premium the further OTM you go. However, if you are assigned the 100 shares, you will be able to purchase the shares at a cheaper price.
Starting a New Wheel: Selling a Cash-Secured Put on AAPL
AAPL's Current Price: $116.97
Capital needed: $11,600
Expiration Date: November 13, 2020
Strike: $116.00 (Willing to buy the 100 shares at this price)
Premium: $645
Cost Basis: $116 - $6.45 = $109.55
Note: If you want to be more conservative, you can select a strike lower than the current price. You can consider choosing the $115 or $114 strike. You won't receive as much premium the further OTM you go. However, if you are assigned the 100 shares, you will be able to purchase the shares at a cheaper price.
Election is Coming
You probably noticed that we're selling puts 5-weeks out to be a little bit more conservative. We are selling with a longer expiration date, so we can collect more extrinsic value and lower our cost basis if we are assigned the 100 shares.
If you want to sell a closer expiration date, perhaps 3-4 weeks out, feel free to do so. You may want to consider selling 2-3 strikes OTM, just in case there are negative reactions with the political climate.
Earnings:
You guessed it, earnings is right around the corner! Make sure to keep an eye out on these companies to see if they have good report cards.
Microsoft MSFT | October 27
Advanced Micro Devices AMD | October 27
MasterCard MA | October 28
Visa V | October 28
Amazon AMZN | October 29
Facebook FB | October 29
Apple AAPL | October 29
PayPal PYPL | November 2
Waste Management WM | November 2
Square SQ | November 5
Final Thoughts:
This journey that you're taking is not all about money. It's about the freedom that comes with it. It's the freedom to not have to work for money. It's the freedom to have money work for you. It's the freedom to have more time to spend with friends and family and have the ability to help someone in need. It's the freedom to pursue what you're truly passionate for in life.
Stay patient, positive, and healthy! 😎
- 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.