Hey Advanced Traders!
Since it looks like the markets still can't make a decision on where to go given the uncertainty surrounding interest rates, let's set up some spreads this week and collect some premium.
Poor Man's Covered Calls / Modified Calendar Spreads
For those of you who have AAPL LEAPS options, you can consider selling calls against them. Remember that your LEAPS options are similar to having a stock surrogate and you can sell calls against them to create a spread.
Step 1: Own 1 AAPL call LEAPS option
Step 2: Sell a call option
-Expiration Date: January 7, 2022
-Strike: $185 (Delta 0.19)
-Premium Collected: ~$144
Step 3: Set a buy stop order for 100 shares at $184
The goal is to have AAPL stay below $184 from now until January 7, so we can have theta decay the sold call option value. The premium will essentially help you reduce the cost basis of your LEAPS option. If AAPL rallies up above $185, we can sell our AAPL LEAPS for a profit, buy 100 shares of AAPL at $184 each, and covert our trade into a covered call.
AMD Bear Call Spreads
If you set up some bear call spreads on AMD a couple of weeks ago, you can consider closing out your positions and locking in profits. You can then consider opening up new bear call spread positions.
Expiration Date: January 7, 2022
Step 1: Buy 1 $200 strike call option with a delta 0.02 for $16
Step 2: Sell 1 $160 strike call option with a delta 0.16 for $154
Step 3: Set a buy stop order of 100 shares at $159
Credit received: $154 - $16 = $138
The goal is for AMD to stay under $159 from now until January 7. If AMD rallies up towards $160, we will buy 100 shares at $159 each, sell our purchased call option, and convert our trade into a covered call.
As always, feel free to tweak the width of your spreads to your risk tolerance.
Happy Holidays everyone! Enjoy your time with your loved ones! 🙏😊
Steve and the Call to Leap Team
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