Hi Wealth Builders! 👋
It seems like we're doing very well so far for the 2023 year!
The consumer price index fell 0.1% in December, meeting expectations, for the biggest drop since April 2020. On an annual basis, CPI rose 6.5%, which has been slowly decreasing over the past few months. The biggest reason for the easing in inflation came from a sharp drop in gasoline prices, which are now lower on a year-over-year basis.
Heat Map📈
Here's this week's heat map:
How Are The Major Indices?📊
SPY
SPY is retesting its resistance line that we haven't been able to break out of since last year. Before we get too excited, I still prefer to see this breakout before investing more aggressively. If we break and stay above, I will add a couple more shares to my portfolio. Stay patient and vigilant.
Stocks I Purchased This Week
I slowly added a couple of shares this week because we broke a couple of resistance lines and were able to progress higher. Again, I am still more focused on buying steady companies that are part of the DOW30 and pay a dividend.
However, with this week's rally, I notice that institutions have been putting more money back into growth stocks, like AMZN and NVDA. If I continue to notice this trend and see some breakouts in the technicals, I'll be more inclined to buy more shares.
V
I purchased 5 more shares of V.
MA
I purchased 5 more shares of MA
HD
I purchased 5 more shares of HD.
NKE
I bought 5 more shares of NKE.
WM
I purchased 5 more shares of WM even though it didn't break any resistance line this week. However, I noticed that the stock is still holding strong on top of its support line.
PYPL
Though PYPL is a highly volatile stock, I went ahead and purchased 15 shares anyway this week to average down my cost basis. It seems like there's a strong support line at the $67 level and it broke out of it's downward trend in May and has been consolidating sideways ever since. Again, I understand that there is much higher risk with buying these shares and I don't necessarily recommend this to anyone. I am still bullish for the long-term on the thesis of us progressing towards a digital, cashless economy where PayPal will be able to benefit from.
Right now, I still prefer to be more on the conservative side as we're nearing the S&P500 resistance line. I'm most likely not going to be buying anymore shares this upcoming week to observe how the markets react overall and if it can continue its bullish momentum.
Steve's Trades
I'm still selling covered calls against my long-term holds. I'm choosing around delta 0.10s or lower with expiration dates in mid to late February.
If you're going to do the same, make sure you choose a strike you are comfortable with. Remember that the markets will rally again sooner or later and you want to be prepared for that.
NKE Cash-Secured Puts:
If you had cash-secured puts from a couple of weeks ago and see that your option contracts have decayed around 50% or more, feel free to close your positions.
Because NKE is still trending higher and broke above the $125 level, I am going to sell a far OTM CSP to be more on the conversative side.
Expiration Date: March 3, 2022
Step 1: Have $11,700 of cash as collateral
Step 2: Sell 1 $117 strike put option (delta 0.17) for $121.
Credit/premium received: $121
NKE Bear Call Spreads:
Expiration Date: March 3, 2022
Step 1: Buy 1 $150 strike call option (delta 0.05) for $30
Step 2: Sell 1 $140 strike call option (delta 0.20) for $108
Step 3: Set up a buy stop order of 100 shares for $139 each.
Credit received: $108 - $30 = $78
If you decide to trade both at the same time, you are essentially trading a Jade Lizard. You want the stock to stay above $117 and below $140 for the next couple of days. If the stock doesn't really move, you are able to close your positions and lock in your profits.
If NKE suddenly drops, you can consider first closing out your BCS.
If NKE suddenly rallies, you can consider first closing out your CSP.
In the end, feel free to tweak the numbers around based on your risk tolerance.
Ask Steve 💭
Let's see what some of our members asked this week. Here are the top questions we received:
Q: I followed the January 8th position recommendation and placed a cash-secured put on Starbucks at $98. However, when I went to place it using Charles Schwab, there was a note saying at the bottom saying that all cash-secured puts would have that amount removed from their account so they can't use it. I placed the trade and Schwab did not remove any amount from my account, making me think I placed it wrong. Can you please explain step by step how to place a cash-secured put using Charles Schwab? A: Check your positions to see if you have an open contract for a cash-secured put. If you do not see it, it may mean that you did not sell the cash-secured put.
When selling a cash-secured put, make sure you click the bid number on the option chain that correlates to the strike price you choose. Puts are usually on the right side of the option chain. This will show you how much premium you'll be able to receive by selling the contract. Make sure to review your order and that you are selling one contract. Once you sell the contract, you should get a confirmation message on your app or even in your email.
You can also refer to the videos in the archived section here: https://www.calltoleap.com/standardarchives
Q: In FAQ you mentioned "No. You need to wait until the actual day of expiration to see if the stock price is at or above the $101 strike. If so, Craig will automatically buy your shares away from you for $101 each" if the stock price reaches $101 before expiration date. But in the videos, you mentioned a call buyer can buy the shares away from you before the ex-dividend date instead of on the Friday. Does that mean a person can buy away my shares before expiration date if it reaches strike price?
A: Correct. the buyer of the contract has the right to buy your shares at any time before the expiration date. However, this is a rare event. The times that this usually happens is if the stock is near or has surpassed the strike price of the contract and there is an ex-dividend date coming up. The buyer will have a higher incentive to buy your shares away from you for a lower price while also getting the dividends.
Q: To get clarify, if I sell bear call spreads and the stock never hits the strike price of the second option, I get to keep all the money?
A: Correct. The goal is to let the stock not go anywhere from now until expiration (or sometimes earlier) so that theta can decay the option values. At Call to Leap, we like to sell depreciating option contracts to other people as a form of income and use the capital to buy more long-term holds. This helps us compound our portfolio a little faster for the long-term.
📌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.
Keep an eye out to see if we can finally break out next week. 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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