Hey Investors and Traders!
It looks like we had somewhat of a neutral week. This past Friday, news came out that the U.S. employment growth slowed more than expected in September and over 300,000 Americans lost their jobs permanently. We also heard news from the White House that President Trump and the First Lady contracted COVID-19. Because of all the news, we had a bit of a negative reaction on Friday.
Here are some notable price movements in the stocks we're trading:
Advanced Micro Devices AMD
Monday Open: $79.12
Friday Close: $81.80
Microsoft MSFT
Monday Open: $210.88
Friday Close: $206.19
Apple AAPL
Monday Open: $115.01
Friday Close: $113.02
Trade of the Week:
Reselling your Covered Calls
Many of you sold covered calls and cash-secured puts on AMD between the $82 - $84 strike, MSFT at the $212.50 strike, and AAPL at the $120 strike, around a month ago, and your calls expired this past Friday. You can check out this trade from our September 6, Membership Positions here. If this happened, sell another call against your shares at or around the same strike as you did before. You can choose the 4 week expiration date. You should be able to collect another $300-500 worth of premium per contract. Woohoo!
Again, keep in mind of earnings in October. MSFT has earnings on October 21, 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: $81.80
Capital needed: $8,000
Sell at the Expiration Date: October 30, 2020
Select the Strike: $80.00 (Willing to buy the 100 shares at this price)
Premium you'll receive: $495
Cost Basis: $80.00 - $4.95 = $75.05
Note: If you want to be more conservative, you can select a strike lower than the current price. You can consider choosing the $79, $78, or $77 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: $206.19
Capital needed: $20,500
Sell at the Expiration Date: October 30, 2020
Select the Strike: $205.00 (Willing to buy the 100 shares at this price)
Premium you'll receive: $745
Cost Basis: $205.00 - $7.45 = $197.55
Note: If you want to be more conservative, you can select a strike lower than the current price. You can consider choosing the $202.50 or $200 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: $113.02
Capital needed: $11,300
Expiration Date: October 30, 2020
Strike: $11,300 (Willing to buy the 100 shares at this price)
Premium: $515
Cost Basis: $113.00 - $5.15 = $107.85
Note: If you want to be more conservative, you can select a strike lower than the current price. You can consider choosing the $112 or $111 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.
Keep Spinning That Wheel
From chatting with many of you this week, I want to let you know that you guys are doing a wonderful job! Even with the markets not being able to make up it's mind, you are still bringing in a lot of money from patiently selling your options. Just keep spinning that cash wheel!
Final Thoughts:
October may be a spooky and volatile month. Why? We have earnings coming up, an election on the horizon, stimulus talks still bouncing around, and our President and First Lady are in quarantine. Whew!
Though all of this is news that will affect the short term movement of the stock market, always remember to zoom out and look at the big picture. Oh what's that? The stock market always rises as long as the companies we are investing and trading in are fundamentally strong and making that dough.
Lastly, please keep asking us your questions! We are here to help!
Stay patient, optimistic, 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.
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