🔒 Membership Positions - October 31, 2021

Happy Halloween!

We had a wonderful week of companies delivering fantastic earnings! Woohoo! Let's take a look at the market as a whole and their new ATHs!

Here's SPY:

Here's QQQ:

Here's DIA:

I've been adding more shares of these ETFs to my portfolio. What about you?

Technical Analysis 📈📉

WM:

WM did pretty well for earnings and raised their revenue outlook. They company expects revenue growth of 17% - 17.5% compared to their prior view for growth of 15.5% - 16%. I am currently adding more shares to my portfolio.

PYPL:

PYPL is still selling off. There is even a chance that it may even go down to the $225 level. Keep in mind that earnings is coming up and the trend may change. Whenever a large price drop in a stock occurs, executives may be incentivized to come out during earnings and give positive news to appease investors. I would not buy anymore shares until after earnings and if the company delivers positive reports. Like always, I also want to see a positive change in trend.

PINS:

Similarly, I would not do anything until earnings are reported for PINS. As of now, I am holding onto my shares. If they report positive news and Wall Street rewards them, I plan on holding the shares to ride the wave up before selling any other rounds of calls against my shares. If they report negative news and a deeper sell-off occurs, I plan on exiting my positions and will most likely sell $10 OTM call options.

NKE:

NKE is still strong with its upward trend. I am still adding more shares to my positions.

FB:

FB came out with news this week about rebranding their name to Meta and their ticker symbol will change to MVRS in the beginning of December. I think this was a strategic move for Facebook as it wants to move forward with their past privacy issues and introduce a new digital platform and experience for their users. In terms of revenue, FB is still doing amazing in their advertisement business and I believe that Wall Street will continue to reward them in the future. As of now, I am going to take a conservative approach and wait to see if FB can surpass its previous $343 high. If so, I will be more inclined to adding more shares.

COST:

COST is making new ATHs as well. If you had shares before October 28, you should be getting your dividends soon. I also anticipate that they will increase their dividend payout in the next quarter as this has been the pattern in the past.

Trade of the Week:

Spinning your wheels: 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 your shares were called away last week, you can consider restarting your wheel. For beginners, you can consider starting again by selling a cash-secured put, around 1-3 strikes OTM (or for a lower price).

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.

Keep It Balanced: Just as a friendly reminder, we recommend to not go overboard with growth stocks, like AMD and PINS, for your Wheels. Yes, they do have high premiums and they are relatively less expensive compared to AAPL, NKE, SBUX, and MSFT. However, just keep in mind that stocks that don't pay a dividend and have high premiums/IV typically drop the fastest when there is uncertainty in the markets. If you are brand new to starting the Wheel, we recommend starting off with AAPL, NKE, SBUX, or MSFT.

Upcoming Earnings: Please be mindful of company earnings coming up in the next couple of weeks. If you don't feel comfortable with the volatility, you can wait until after your favorite companies deliver their numbers to see if you want to start a new Wheel. If you want to still continue your Wheel to take advantage of the higher IV, you can certainly do so.

Extra Shares On The Side: As I mentioned before in the previous weeks, you can always keep some extra shares on the side in case your favorite stock runs past your strike price. So instead of purchasing 100 share to start a Wheel, you can purchase 125 shares. This way, you will have an extra 25 shares to gain from the potential price move up.

Here are some trade recommendations and see what fits your personal risk-tolerance:

MSFT Monday Open: $309.36 Friday Close: $331.62 5-day change: 7.19%

Starting a New Wheel: Selling a Cash-Secured Put on MSFT - MSFT's Current Price: $331.62 - Capital Needed: $33000.00 - Sell at the Expiration Date: 2021-11-19 - Select the Strike: $330 - Premium you'll receive: $548.00 - Cost Basis: $330.00 - $5.48 = $324.52

Starting a New Wheel: Selling a Covered Call on MSFT - MSFT's Current Price: $331.62 - Capital Needed: $33162.00 - Sell at the Expiration Date: 2021-11-19 - Select the Strike: $332.5 - Premium you'll receive: $545.00 - Cost Basis: $331.62 - $5.45 = $326.17

AAPL Monday Open: $148.68 Friday Close: $149.80 5-day change: 0.75%

Starting a New Wheel: Selling a Cash-Secured Put on AAPL - AAPL's Current Price: $149.80 - Capital Needed: $14900.00 - Sell at the Expiration Date: 2021-11-19 - Select the Strike: $149 - Premium you'll receive: $255.00 - Cost Basis: $149.00 - $2.55 = $146.45

Starting a New Wheel: Selling a Covered Call on AAPL - AAPL's Current Price: $149.80 - Capital Needed: $14980.00 - Sell at the Expiration Date: 2021-11-19 - Select the Strike: $150 - Premium you'll receive: $308.00 - Cost Basis: $149.80 - $3.08 = $146.72

AMD Monday Open: $120.52 Friday Close: $120.23 5-day change: -0.23%

Starting a New Wheel: Selling a Cash-Secured Put on AMD - AMD's Current Price: $120.23 - Capital Needed: $12000.00 - Sell at the Expiration Date: 2021-11-19 - Select the Strike: $120 - Premium you'll receive: $395.00 - Cost Basis: $120.00 - $3.95 = $116.05

Starting a New Wheel: Selling a Covered Call on AMD - AMD's Current Price: $120.23 - Capital Needed: $12023.00 - Sell at the Expiration Date: 2021-11-19 - Select the Strike: $121 - Premium you'll receive: $458.00 - Cost Basis: $120.23 - $4.58 = $115.65

NKE Monday Open: $163.23 Friday Close: $167.29 5-day change: 2.48%

Starting a New Wheel: Selling a Cash-Secured Put on NKE - NKE's Current Price: $167.29 - Capital Needed: $16500.00 - Sell at the Expiration Date: 2021-11-19 - Select the Strike: $165 - Premium you'll receive: $229.00 - Cost Basis: $165.00 - $2.29 = $162.71

Starting a New Wheel: Selling a Covered Call on NKE - NKE's Current Price: $167.29 - Capital Needed: $16729.00 - Sell at the Expiration Date: 2021-11-19 - Select the Strike: $167.5 - Premium you'll receive: $320.00 - Cost Basis: $167.29 - $3.20 = $164.09

SBUX Monday Open: $114.74 Friday Close: $106.07 5-day change: -7.55%

Starting a New Wheel: Selling a Cash-Secured Put on SBUX - SBUX's Current Price: $106.07 - Capital Needed: $10600.00 - Sell at the Expiration Date: 2021-11-19 - Select the Strike: $106 - Premium you'll receive: $222.00 - Cost Basis: $106.00 - $2.22 = $103.78

Starting a New Wheel: Selling a Covered Call on SBUX - SBUX's Current Price: $106.07 - Capital Needed: $10607.00 - Sell at the Expiration Date: 2021-11-19 - Select the Strike: $107 - Premium you'll receive: $281.00 - Cost Basis: $106.07 - $2.81 = $103.26

Ask Steve 💭

Let's see what some of our members asked this week. Here are the top questions we received:

Kevin

Q: I don’t have a "Cash-Secured Put" option when selecting an option strategy. If I were to write a Cash-Secured Put" would I just select "put" like I have here?

A: So it won't be called a "cash-secured put" in the platform. If you want to sell a cash-secured put, select your strike price (you can consider selecting the "bid" price for that strike) and verify you're SELLING a cash-secured put by making sure you've selected "sell", "put", and "1" (if you want to sell 1 contract) and then "market" if you want to execute your trade asap. Your brokerage will then hold money as collateral for the shares.

Jonathan

Q: Instead of buying 100 shares of a stock and gets a secured put could I buy 50 shares of a stock ? I’m fairly new to options and don’t want to risk all my money.

A: You won't be able to sell cash secured puts or covered calls because you're required to have 100 stocks to sell 1 contract. Consider slowly adding more shares until you have 100 if you want to sell covered calls or cash secured puts.

Augustine

Q: PINS is bleeding, what do you advise the holders do?

A: We still believe PINS is a wonderful stock. However, the stock has fallen out of favor by Wall Street, thus the sell off is still occurring. Our plan is to wait until next week when PINS delivers their quarterly reports. If they deliver positive results, we may be inclined to hold onto our positions. If not, we are planning on exiting our positions by selling $10 OTM calls. Right now, we would recommend to just wait since PINS has a history of high volatility.

Keep in mind that with stocks that do not pay a dividend drop the fastest. Looking at historical patterns with companies like SQ and AMD, you can see they had price drops of more than 50%. SQ had a high of $101 and dropped to $49. SQ is now at $250. AMD had a high of $33 and dropped to $15. AMD is now at $120. Past performance doesn't predict future growth. However, we do see similar patterns in younger companies like PINS.

Yoon

Q1: I’m so crushed with pins it’s my fault I invested two puts with this but do you think there’s a chance? It broke the lowest line.

A1: If we can recommend anything right now, it would be to maintain a positive outlook on investing and maintaining a positive wealth mindset. Sometimes our trades go the opposite way, but that is okay. We have to learn how to trade and when to trade and how much to trade. It is all part of the learning process. We like PINS's business model, but only time can tell where the stock will go. In addition to maintaining a positive wealth mindset, we recommend staying patient and waiting for a retracement. Hang in there Yoon :)

Q2: Steve mentioned 30/30/30/10% rule includes growth stocks, wheels, dividend stocks and leaps. But he also said he only invests 60% and leave the rest cash . If I have 80,000 invested, do I leave 40% in cash and only invest 60%?

A2: If you have around $80,000, you may want to keep around $8,000 in cash just so you have the capability to invest in some companies of your choosing in the future. I typically follow the 30/30/30/10 allocation, but sometimes I may change the ratio depending on my own risk tolerance and the conditions in the market. In the end, see what works best for you. If you feel that that you are comfortable with investing more, go ahead and do so. If you want to just let your premiums sit in cash so you can build a reserve for future investments, you can do so too. We do, however, recommend that the majority of your portfolio is in S&P500/DOW30 stocks as they are statistically safer to own due to their history of earnings growth.

Brando

Q: I just received a new job and my employer is offering me a 401(k) plan. I have never touched a 401k, and I wanted to know how should I proceed? On the other hand, I currently have over $300K invested into a traditional cash market account and have a 6 month emergency fund. I would like to know what you propose on proceeding with a 401k on building long-term wealth. Thanks! B

A: 401Ks are great because of their tax advantages and your company tends to give you a little free money with a company match. You can ask your HR to see if they do that for you. However, the trade-off is that that you may not have that much control on what you actually invest in with a 401K and they may charge you a fee for managing your account. You can consider supplementing your investing by opening up an IRA as well. With an IRA, you're given more freedom to invest what you want and you can also sell covered calls within the account. And yes, you are able to have a traditional cash account (which you already have), a 401K, and an IRA all at the same time. Cool, huh?

Adam

Q: Hi guys, love what you are doing. On the next update, can you give any speculation on what to do with MSFT since it had a nice post earnings pop (I know you do this weekly)? I tried to sell one put on it some weeks back at $295 when it was $303, but the order did not go through. This would of been my first put, and I am hesitant on what to do now - I'd like to do with MSFT since it's very stable, and I'm not sure to hang back for a sell off or not. Thank you so much, cheers from NJ!

A: Yes, we do this weekly :). We typically don't like to time the market. Because we do the wheel on stocks we already want to own long-term, we are okay with the fluctuations that happen. You can consider selling a cash secured put, covered call or just sitting out and observing until you're comfortable to trade. We believe MSFT is a stable stock and a great one to do the wheel on!

Earnings

MSFT

Microsoft reported first-quarter earnings of $20.5 billion and increasing its quarterly profit record by more than $4 billion.

Revenue increased to $45.3 billion from $37.15 billion. Cloud sales increased by around $4 billion from a year ago and personal-computer revenue beat expectations, even with a reported slowdown in PC shipments.

The company's Intelligent Cloud segment, which includes Azure services, increased to sales of $16.96 billion from $12.99 billion a year ago. Microsoft said that Azure revenue grew 50% from a year ago.

Microsoft’s traditional personal-computer business, such as their laptop and desktop sales, grew to $13.3 billion from $11.85 billion a year ago.

Microsoft’s cloud-software division, such as their Office products, grew to $15.04 billion from $12.32 billion a year ago. Microsoft expects to raise prices more than 10% on many Office 365 services starting in March, meaning that the company will have a higher probability to increase their top-line revenue next year!

AAPL

Apple had a rare revenue miss as the company's iPhone and wearables sales grew slower than anticipated.

However, Apple’s revenue for the period increased to $83.4 billion from $64.7 billion. Analysts were anticipating for $85.1 billion.

Tim Cook attributed this to supply chain constraints and said that this caused around a $6 billion negative impact on revenue.

Chief Financial Officer Luca Maestri said the company expects an even greater impact from supply constraints during the current quarter but anticipates that it will set a revenue record during the quarter. Apple forecasts year-over-year revenue growth in each product category but the iPad.

iPhone revenue increased to $38.9 billion from $26.4 billion a year prior.

Mac sales increased to $9.2 billion from $9.0 billion.

iPad revenue increased to $8.3 billion from $6.8 billion.

Apple's services revenue increased to $18.3 billion from $14.5 billion a year earlier.

Wearables and home and accessories category, increased to $8.8 billion in revenue, compared with $7.9 billion a year prior.

AMD

AMD reported third-quarter net income of $923 million, compared with $710 million in the year-ago period.

Revenue rose to $4.31 billion from $2.8 billion in the year-ago quarter.

AMD raised guidance for the full year again, as it has in every quarterly earnings report so far this year. The company now projects sales to grow about 65% year-over-year compared with their previous guidance of 60%.

AMD expects fourth-quarter revenue of $4.4 billion to $4.6 billion.

Sales from enterprise, embedded and semi-custom chips, which includes data-center and gaming-console revenue, increased 69% to $1.91 billion. This is compared to $1.13 billion a year ago.

AMD's computing and graphics segment had second-quarter sales of $2.4 billion, which is up from $1.67 billion last year.

Visa reported revenue of $6.6 billion from $5.1 billion.

CFO, Vasant Prabhu, highlighted a continued spending rebound with healthy domestic spending and a faster-than-anticipated recovery in travel. Remember that travel-related spending is important for Visa because cross-border transactions tend to be higher yielding, meaning that the company can make more money per transaction.

Visa’s overall payment volume was up 17%, processed transactions grew 21%, and cross-border volume increased 38% in the quarter.

For the fiscal first quarter, Visa expects net revenue growth in the high-teens percentage range and operating-expense growth in the mid teens, assuming that current trends continue.

Visa's board of directors approved a 17% increase to the quarterly dividend. The new dividend will be $0.375 a share, up from $0.32 a share.

Mastercard beat expectations and also saw an uptick in spending.

Mastercard’s reported revenue of $4.96 billion from $3.84 billion.

Mastercard’s gross dollar volume increased 20%, cross-border volume increased 52%, and the company saw 25% growth in switched transactions.

Mastercard noticed trends in growth of contactless payments, which represented 48% of global in-person transactions during the third quarter, up from 45% last quarter.

GOOGL

Google parent Alphabet Inc. reported quarterly results that exceeded Wall Street estimates.

The advertising company reported net income of $18.94 billion, compared with net income of $11.25 billion in the same quarter last year.

Total overall revenue was $65.1 billion, up 41%.

Significantly, Alphabet’s operating margin improved to 32% in the quarter, vs. 24% in the same quarter a year ago.

Google’s total advertising increased to $53.1 billion, which is a 43% rise.

Search revenue increased to $37.9 billion from $26.3 billion a year ago.

YouTube ad sales increased to $7.2 billion from $5 billion a year ago.

Google’s Cloud revenue climbed 47% to around $5 billion.

SBUX

Starbucks revenue of $1.76 billion compared with $393 million in the year-ago period.

Sales rose 31% to a record $8.1 billion, from $6.2 billion a year ago.

Comparable-store sales globally rose 17%, and the average ticket size went up 3% on record global revenues.

However, China same-store sales decreased by 7 percent, driven by a 5 percent decline in the average ticket and a 2 percent decline in transactions. The company explained that the Delta variant of COVID-19 took its toll on sales.

Starbucks anticipated $3 billion to be loaded on Starbucks cards during the holiday season.

Starbucks said Wednesday it was raising U.S. employees’ wages to at least $15 and up to $23 per hour and making other changes to improve working conditions in its stores.

Conclusion

I am excited to see that these companies did so well and I anticipate their share prices to go higher in the next couple of months, especially with the holiday season rolling in. Make sure to always slowly scale in your positions and to keep your 30/30/30/10 allocation.

Submit Your Questions 🙋‍♂️🙋‍♀️

Have any other questions? Before asking me and my team, feel free to check out our Level 1 FAQ. This FAQ is located on the Dashboard. 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.

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.

Grocery Shopping

Often times when we go to the grocery store, we may be tempted to shop in the middle aisles where the chips and ice cream are found. And though it's totally okay to eat a couple Hot Cheetos once in a while, the majority of our diet should be focused more on whole, well-balanced, nutrient-dense foods like fruits, vegetables, and lean protein.

When we invest, I ask that we do the same.

I recommend that our first priority of investing to be comprised of the foods around the perimeter of the grocery store. ETFs like SPY and QQQ, and DOW30 dividend-paying stocks like MSFT, AAPL, and V are recommended to make up the bulk of our portfolios as they have history of weathering through many storms. If you want to pick up some candy after you do the bulk of your investing, you certainly can. I just ask that you do so in moderation, so you don't get a stomachache.

Have a wonderful and safe 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.