Hi Advanced Traders!
Like what I mentioned in the Standard Positions this week, even though we had a strong, weekly, green candlestick, it might be wise that we still trade cautiously to see if we continue to make higher highs and lows, or if it's possible that we start to consolidate sideways.
If you have some spreads set up on AMD from weeks before with around a 50-80% profit, you can consider closing them to lock in your profits.
If you are still itching to start a new wheel, you can consider setting up a bear call spread first, rather than first selling a cash-secured put.
Why? If the markets continue to have uncertainty, AMD will most likely pullback faster than other stocks, which means that we can keep the credit from our bear call spread.
If the markets rally, we can buy 100 shares to cover our second leg, which then converts our bear call spread trade into a covered call trade.
This is what I'm planning on doing this week:
Expiration Date: April 14, 2022
Step 1: Buy 1 $150 call option (delta 0.03) for $17.
Step 2: Sell 1 $130 call option (delta 0.16) for $112.
Step 3: Set up a buy-stop order of 100 shares for $129 per share
Credit: $112 - $17 = $95
The goal is to have AMD stay below $130 from now until April 14. If it does, both legs will expire worthless and you will be able to keep $95. Of course, we also know that we can always close our positions early to lock in profits.
If AMD rallies up to $130, you will buy 100 shares for $129 each, convert your bear call spread into a covered call, and sell your first leg.
Remember that you want to be long-term bullish on AMD, but short-term neutral to slightly bearish if you want to set up this bear call spread. You want to be willing to purchase the shares to cover for your second leg.
In the end, feel free to tweak the numbers to your own risk-tolerance and see if you are comfortable trading this strategy this week.
Have a wonderful weekend! 😀
-Steve and the Call to Leap Team
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