🔒Premium Membership Positions

Hi Wealth Builders! 👋

We finally broke out! Let's see what happened this week!

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

QQQ

Since QQQ finally broke out, I added 5 shares to my long-term holds. I also noticed that tech stocks are moving up faster than the DOW30. This may indicate to us that institutions are favoring growth stocks. I would still be more on the cautious side since we still have to see what other companies have to say about their numbers and what the Federal Reserve has to say about raising interest rates next week.

AMD

It seems that AMD is nearing its resistance line. Keep in mind that the company is set to have earnings next week. If their number are strong, I anticipate this stock to finally break out.

AMZN

AMZN recently broke out with the major indices. If earnings come out strong next week, I may be adding a couple more shares to my long-term holds. If you set up a bear call spread on this stock, you most likely covered yourself and converted your trade into a covered call. You can also sell your first leg since you contractually don't need it anymore.

GOOGL

Lastly, I'm keeping a close eye on GOOGL. Hopefully a lot of these tech stocks that are reporting next week will give us solid numbers to continue us higher.

Steve's Trades

I'm not going to place any trades for this week since I want to see what other major corporate earnings are, what the Federal Reserve says, and how the markets react.

If you sold some cash-secured puts a couple of weeks ago, feel free to close out your positions if you want to lock in your profits. 🙂

Earnings Snapshot 📸

As we begin earnings season, we want to focus on companies that are generating increasing revenue. As history has shown us time and time again, companies that continue to make money on a consistent basis are the ones that progress higher.

MSFT

MSFT has again increased their revenue in the double digits in a year-over-year basis in all of their major segments.

However, Wall Street has a couple of concerns:

Microsoft’s Azure cloud growth slowing to 31%, barely beating analysts’ projections. Management called for $50.5 billion to $51.5 billion in revenue for the next quarter, while analysts expected over $52 billion, with Azure growth slowing further.
Microsoft's More Personal Computing unit saw sales decline 19% to $14.2 billion. The unit includes Windows PC software, Xbox video games, Surface computers, internet search and advertising.
Windows licensing revenue collapsed 39% in the holiday sales quarter amid declining PC sales. Devices revenue also fell by 39%. And Xbox content and services revenue decreased 12% in the period.

Comparing the stock to the major indices, MSFT has done very well over the past 5 years.

I am still a long-term investor of Microsoft.

The company continues to increase their dividends on a year to year basis.

However, I'm looking at the short-term technicals and see that the stock has not been able to break out of its green resistance line. I'm also taking into consideration on what some of Wall Street's concerns are. Though I'm still overall bullish in the stock, I'm patiently going to wait to see how Wall Street digests all the news and if the stock can finally break out of it's downward trajectory before adding any more shares.

MA has been increasing its revenue in a year-over-year basis with increasing cross-border volume fees and transaction processing. Remember that MA makes a certain percentage whenever people swipe their cards.

MA has also been consistently increasing their dividends each year, which gives many institutional investors more incentive to invest in their company.

The 5 year trend is strong and the stock seems to be heading towards a new all-time-high. If you have been patient with the stock, you can finally see yourself being rewarded.

I purchased another 5 shares of MA this week and plan on purchasing more if the stock continues to rise in the next few weeks.

V has also been increasing their revenue on a year-over-year basis with increasing payment volume.

The stock has done well compared to the S&P500 over the past 5 years.

The company is also increasing their dividends on a consistent basis.

The long-term trend is strong and I also purchased another 5 shares of V this week. This stock also seems to be nearing a new all-time high.

Ask Steve 💭

Let's see what some of our members asked this week. Here are the top questions we received:

Q: Hi I sold a covered call against my Apple shares I hold but unfortunately I chose a strike price of 150 instead of 160 which would mean if I have to sell my shares for this price I will lose money. Is there anything I can do? Thanks in advance.

A: There are a few options you can consider:

1) You can consider canceling your contract by buying to close your covered call. However, keep in mind that if the underlying stock has risen since you last sold your covered call, the value of your contract has increased, resulting in you having to pay more than what you received as premium to close your contract, resulting in a loss.

2) You can consider letting it go to expiration and see where the underlying stock expires at. With this option, you'd potentially let your shares go at your $150 strike if the underlying stock reaches $150 at expiration.

3) You can consider "buying back and rolling out". We have a great video on this in our course. Feel free to check it out! Essentially, you buy back your covered call for a higher price, but then sell it for an even higher price at a further expiration date. Here, you can make additional premium as well.

On an additional note, please remember that before you make any trade, always double check your numbers and consider what can happen at expiration. If you are not comfortable with what can happen at expiration, we don't recommend proceeding. With that being said, what your do with your portfolio is completely up to you.

Q: I have a BCS on AMZN 100/130 with a Feb 17 expiration. I had a buy stop for 99 which triggered last week so now I have 100 shares. Do I keep both legs of the BCS till expiration? How do I close the BCS without losing money?

A: Your 1st leg ($130 bought call option) should have increased in value as the underlying stock price increased. Due to this, you can consider selling to close your 1st leg ($130) for a profit. Now you have essentially converted your trade into a covered call because you now have 100 shares and your 2nd leg ($100 sold call option).

Since you now have a covered call, you can consider letting your option go to expiration. If at expiration the underlying stock is at $100 or above, your shares will get called away and you should make $100 in capital gains. If the underlying stock is below $100 at expiration, you'll get to keep your shares and you can consider selling another covered call against your shares for more premium.

Q: I saw your weekly positions this week for SBUX, I wanted to know if you suggest a BCS as opposed to selling a put against it. I have enough margin but if i were to sell a put robinhood holds double the collateral and as a result is cash intensive (i.e $9600x2).

A: What you do with your portfolio is completely up to you. Regardless if you choose to sell a CSP or BCS on SBUX, just be sure that you are okay with any potential outcome of the trade you make. This means if we're selling a CSP, we are choosing a strike that we are comfortable potentially owning the shares for. If we're doing a BCS, we understand that if the underlying stock price rises and triggers our buy stop order, we would be buying 100 shares at a higher price. BCSs is a more neutral to bearish outlook and can be relatively more cash intensive. If this is a concern, you can consider selling a CSP instead.

📌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.

So far earnings have been great! Let's see what happens next week! 😀

-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.