Hi Wealth Builders! 👋
It looks like we ended the week relatively flat, with the exception of a couple of stocks progressing higher than others. (More on this below👇)
Heat Map📈
Here's this week's heat map:
How's the S&P500 doing?📊
SPY
SPY is still retesting its resistance line that we haven't been able to break out yet. Keep in mind that earnings season starts in a couple of weeks and the Federal Reserve is expected to make their decision on February 1 to see what the next round of interest rate hikes will be. Analysts are expecting that they will increase rates by 25 points, which is lower than the previous 50 point hike. This is due to our last CPI reading and how we may be seeing declining inflation in the next couple of months.
If we get a lower increase in rate hikes and positive earnings, there is a higher chance that the S&P500 will finally break it's downward resistance line.
What I'm Keeping An Eye On
I didn't buy any long-term holds this week as I'm waiting for some stocks to make a higher high before adding another 2-5 shares. Again, here are the stocks I'm eyeing closely.
V
I'm waiting to see if V can crawl back to the $229 level before adding on anymore shares.
MA
Similarly, I'm waiting for MA to get back above the $382 level.
SBUX
SBUX seems to have some resistance at the $105 level. If it can break and stay above, I'll be adding more shares to my retirement account. I also think SBUX is a great wheel candidate right now.
NKE
Likewise, I believe NKE is also doing well and a great wheel candidate.
GOOGL
GOOGL was a big surprise this week as it had a massive 7.6% rally to $98. Like what I mentioned last week, it seems that tech stocks are coming back up more quickly than before. If we break out, I'll finally add more shares to my long-term holds.
NVDA
Lastly, I'm keeping an eye on NVDA to see if it breaks out too.
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.
SBUX Cash-Secured Puts:
If you had cash-secured puts or bear call spreads from a couple of weeks ago and see that your option contracts have decayed around 50% or more, feel free to close your positions.
As we approach SBUX earnings, IV is slowly increasing, meaning that option premiums are bigger. If you don't mind the volatility, you can consider selling a CSP. However, I would choose a strike that is a little further OTM to be on the safe side.
Expiration Date: February 24, 2022
Step 1: Have $9,600 of cash as collateral
Step 2: Sell 1 $96 strike put option (delta 0.18) for $103.
Credit/premium received: $103
Again, make sure you are bullish on SBUX if you want to start this wheel. 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:
Q1: I know in the level 1 series you recommend that if you have <$10K to start with you should start with buying individual stocks with strong fundamentals. Would you say that takes precedent over sell cash-secured puts? Or, would it be a good idea to sell a CSP on say AMD, and then spend the remaining cash buying individual stocks?
A: What you do with your portfolio is completely up to you. With that being said, we don't recommend having your entire portfolio in one stock, especially not a high-risk stock like AMD. If this is your first wheel, we recommend a "more stable" stock like AAPL, NKE or SBUX. As previously mentioned, although we don't recommend having your entire portfolio in one stock by using the wheel strategy, some might use the wheel strategy to earn premium to then invest in long-term holds. Just be mindful that if one stock takes up your entire portfolio, it will be more volatile compared to investing in SPY ETFs.
Q2: Hello! I have a question regarding a stock that I have owned for several years. The stock DCP is a natural gas midstream company that I bought back in 2020 for the dividend and a deal of a price. I'm up 355% and the company was recently purchased by Phillips 66. Since that news the share price has moved very little and hovering around $42. I want to sell and lock in the profits and move on but I'm wondering if there is anything I'm not considering that would be a reason to hold? Thanks!
A: Congrats with the appreciation of your stocks. If you are selling these shares in your taxable brokerage account, be mindful of the tax implications you will have. Since you purchased your shares back in 2020, you will be taxed at a lower rate since you've held onto your shares for longer than a year. If you sell your shares, you can consider diversifying your portfolio by buying more S&P500 ETFs to stabilize your portfolio. In the end, do what you feel most comfortable with.
📌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! I love the trend that we're going in so far in 2023! 😀
-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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