🔒 Premium Membership Positions

Hey everyone!

It looks like market sentiment has been getting better over the past several days. With that said, it may be a relatively safer opportunity to get into some LEAPS options.

What stocks am I favoring at the moment? I am currently eyeing MSFT and V as they are both staying strong and trending near their ATHs. This usually shows me that institutions are putting money into these companies right now.

I believe both of these stocks are more conservative as they are part of both the S&P500 and DOW30, pay a dividend, and have already delivered great earnings.

If you want to invest in a LEAPS option, I would do so conservatively by purchasing between a delta 0.70-0.80 LEAPS option first. If you want to trade LEAPS options, you can consider purchasing a delta 0.60-0.70 LEAP option. Make sure you personally believe in the company and see if the stock fits your risk tolerance.

MSFT LEAPS

Investing in MSFT LEAPS

Expiration Date: June 16, 2023

Delta: 0.79

Strike: $200

Premium: $7900

Trading MSFT LEAPS

Expiration Date: June 16, 2023

Delta: 0.62

Strike: $250

Premium: $4600

V LEAPS

Investing in V LEAPS

Expiration Date: January 20, 2023

Delta: 0.79

Strike: $190

Premium: $5810

Trading V LEAPS

Expiration Date: June 16, 2023

Delta: 0.64

Strike: $220

Premium: $3710

When trading LEAPS options, you can make it your goal of selling the LEAPS option when you make around a quick $200-$300 profit.

When investing in LEAPS options with a higher delta, you can make it your goal of holding onto the LEAPS option and selling it a couple of days before the next earnings date if you are profitable.

When trading LEAPS options, please do not get too greedy. We know many of you made a couple thousand dollars with these leveraged securities in the past. However, we encourage you to not go over 10% of your portfolio in LEAPS, especially if you are new to trading and investing in the stock market. Please follow the general guidelines listed in our Level 2 series.

Bear Call Spread Risk

If you read our previous premium positions, we want to be more careful moving forward with bear call spreads, especially being mindful of stocks that may have significant gap ups on the next trading day.

On Thursday, we experienced NKE with a huge gap up after they announced their earnings. Some of us, including myself, sold our second leg of our spread at around $140, meaning that we set a buy stop order at $139. However, because of the massive rise of NKE, many of our brokerages were not able to purchase the shares after hours at the $139 price level to cover our second leg. When the markets opened on Friday, NKE was trading at around $151.

This was a teaching moment for us and especially for me and my team as we never expected to see this massive rise from a "boring" stock like NKE. This was actually the first time this has happened to us, especially with us being very conservative with our trades.

If this ever happens to you in the future, we recommend you to quickly buy the shares to cover yourself in case the stock rises even more. You can also sell your first leg for a profit.

If you want to still set up CSPs in the future, you can even consider purchasing some shares on the side, perhaps around 25 shares, so that if the stock does run up, you'll be able to profit from your extra shares and only have to get 75 shares (rather than 100 shares), if you need to cover yourself.

Happy trading and investing!

Best,

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.