Hey Wealth Builders!
This week, the Federal Reserve indicated that they will continue to aggressively fight inflation. However, the stock market seemed to shrug off increasing interest rate concerns and strongly rallied up until Friday's close.
What 's Steve Investing? 📈
SPY
SPY's $390 level held up this week and I'm anticipating that the ETF will retest the yellow resistance line in the next couple of days.
If you want to be more on the safe side, you can patiently wait until SPY breaks and stays above the yellow resistance line before adding more shares, which is what I'm doing.
I'll also be observing to see if we can break above the $430 horizontal level to make newer highs. If so, I'll be adding more shares at this level as well.
AAPL
AAPL dropped down to the $152 level this week, not quite to the $151 level that I anticipated. Similar to SPY, I want to see if it's able to break above it's yellow resistance and the $176 horizontal level.
AMZN
AMZN is also having an upward movement. I will wait to see if it's able to surpass it's previous $144 level.
WM
And of course, one of the hidden gems in the S&P500 is WM, which seems to be nearing another all-time high again.
Trade Of The Week:
This week, I'm going to take an observer's seat and not place any trades (both starting new wheels or setting up spreads) or add onto my long-term positions. Institutional traders should be coming back to their trading desks this week and I would like to see what the sentiment is. I would also like to see more breakouts before taking a more bullish approach to my portfolio.
Remember that September and October are historically rocky months as many institutions may sell some shares to either lock in profits or to offset some of their capital gain. On the flip side, since this year has already been a rollercoaster and we have mid-term elections coming up, we may see the opposite happen. Historically speaking, there's typically a rally after mid-term elections. Also, we may even have a Santa Clause rally towards November and December. I will observe what happens this upcoming week and let you know my next moves in the next post.
Here's some data on past mid-term elections and the stock market performance.
If you had covered call contracts that expired worthless, congratulations. You can continue to sell another covered call against your shares around 30 days out in expiration.
Similarly, if you were assigned 100 shares from your cash-secured put, you can covert your trade into a covered call.
I recommend choosing a strike at or slightly above the previous strike price that you previous chose. Even though I said I'm patiently observing the markets, I'm slightly leaning towards the optimistic side of the markets rallying. But again, anything can happen.
Ask Steve 💭
Let's see what some of our members asked this week. Here are the top questions we received:
Q1. Hi just new here. I’m on the minimum when it comes to investing between 10-15k available for the wheel. I want to try the method with two different stocks. Which do you recommend. Apple Microsoft are really expensive. Do you have any ideas for cheaper stocks? I would love to hear from you! Gr. Kristie
A1. Welcome to our wealth building community! We are happy to be a part of your financial freedom journey! :)
What you do with your portfolio is completely up to you. We typically recommend that our members first start wheels on more stable stocks that are part of the DOW30 and pay a dividend such as AAPL and MSFT. Yes, these stocks are more expensive, but also more resilient during times of uncertainty compared to other less expensive stocks. The least expensive stock that we trade the wheel on is AMD, which is a semiconductor stock that has high volatility. It is currently trading around $82. However, due to the high volatility of this stock we typically don't recommend it as your first wheel as your entire portfolio will make up this volatile stock. We typically recommend an AMD wheel after you already have a few wheels of stronger stocks. As mentioned previously, what you do with your portfolio is ultimately up to you.
As of now, you can consider investing for the long-term first. You can slowly build a position in these DOW30 stocks or S&P500 ETFs and let your assets grow. Once your account grows to a comfortable size, you can sell some shares and reallocate your free capital to start a new wheel.
Q2. Why is there no lessons for selling covered puts or shorting stocks?
A2. We don't use these strategies in our program as there may be infinite risk if the underlying stock reverses back to an uptrend and if the trader is not able to cover themselves. Our main outlook is bullish for the long-term, but to sell shorter-dated options during neutral to bearish markets. Since you are a Premium Member, you can consider trading bear call spreads as this trade is more geared towards a non-directional bias.
Q3. I previously bought AMD and NVDA around 115 and 270 respectively last year and have been holding onto them since. Needless to say my pf has taken a major hit and i'm wary of selling calls (because my entry point was so high). Given this turbulent time, what strategy would your recommend for generating income now?
A3. If your cost basis is that high for those stocks, we recommend just being patient and waiting until these stocks retrace again to sell covered calls again. You can even consider selling longer-dated contracts around 3 months out at around the strike price that you obtained your shares to get a larger premium from the higher extrinsic time value.
Remember that the semi-conductor space is highly volatile. Make sure that you have the majority of your portfolio in stable dividend-paying stocks and ETFs like AAPL, MSFT, WM, SPY, and VOO. These are the assets that will help you weather future storms.
📌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.
Have a wonderful 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.
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