by Ben Weiss, for the Call to Leap Team
As major US market indices have been hovering around their all-time highs and showing choppy movement the last week or two, I've been taking a measured approach for the near term. Steve and I maintain a bullish outlook for the mid- and long-term, but we'll be keeping a close eye on the S&P 500 and Nasdaq coming up. Their all-time highs could act as bearish resistance limiting the market from advancing higher in the short term.
While we made it through May with significant bullish strength—the S&P 500 gained +4.2% and the Nasdaq jumped +5.6% for the month—summer months have historically been lower-performing months for the market. At CTL, Steve and I follow the dollar-cost average approach and try not to "time the market" and its ups and downs, however we shouldn't be surprised if we see a bit of slow down ahead. Overall, I'm with many investors in being bullish for the remainder of 2024, but we'll pay attention to the market trends and use the various tools in our options trading toolbox as needed.
Ben’s trades this week
Flying high... With many of our favorite Magnificent 7 companies like MSFT, GOOGL, and AMZN hovering at or near their respective all-time highs, I took a break from opening any new options contracts in these high-dollar stocks while I wait to see if a clearer trend emerges. In the meantime, I've explored selling options on a few lower-cost leveraged ETFs like TQQQ, SOXL, and TNA to collect juicy premiums.
🚨🚨Caution: trading options on leveraged ETFs is a more advanced and risky strategy and not for everyone, especially beginners. Please consider/tweak these positions as they fit your risk tolerance and trading style.🚨🚨
If leveraged ETFs aren't your style (totally ok!) and you're waiting for the market choppiness to settle down, now could also be a good time to build up your cash reserves or invest in your long-term stock and index ETF holdings, which I do every week no matter how the market is behaving.
New Trade 1: SOXL cash-secured put (CTL Level 1) See caution above
Expiration Date: June 28, 2024 (a "weekly" expiration)
Step 1: Have $4,000 cash as collateral
Step 2: Sell to open 1 $40 strike put option (delta 0.18) for $1.20/share
Credit/premium received: $120/contract (minus fees and commissions)
Thoughts: I debated between the $35 and $40 strikes but went with $40 given the late-Friday surge on the market. This strike is certainly riskier than $35, which could be a safer choice given the market choppiness. SOXL tracks the semiconductor industry (check out the unleveraged ETF "SOXX"). Similarly to TQQQ, this ETF moves very fast, both up and down, but can also be a less capital intensive way to trade the volatility in the semiconductor industry, compared to NVDA, SMCI, AMD, TSM, and other expensive stocks. I only trade volatile ETFs when I'm confident I'll be able to monitor my positions throughout the week. If you're a once-a-week or month "set it and forget it" style trader, this ETF may not be for you.
New Trade 2: TNA cash-secured put (CTL Level 1) See caution above
Expiration Date: June 21, 2024 (a "monthly" expiration)
Step 1: Have $3,300 cash as collateral
Step 2: Sell to open 1 $33 strike put option (delta 0.14) for $0.33/share
Credit/premium received: $33/contract (minus fees and commissions)
Thoughts: TNA has been mostly range-bound dating back into 2023. Most recently, it's traded back and forth between about $32 and $43. The $33 strike is more conservative at the bottom end of that range while a $35 strike would be more risky while staying around delta 0.20.
TNA is a leveraged ETF that tracks the Russell 2000 "Small Cap" index, comprised of the 2000 smallest companies on the greater Russell index. Exposure to
small market capitalization companies can be a good diversification to many of the large and mega cap companies we often trade and invest in.
Similarly to TQQQ and SOXL, this ETF moves very fast, both up and down, but can also be a less capital intensive way to get exposure to the small cap sector, compared to IWM and other more expensive ETFs. I only trade volatile leveraged ETF when I'm confident I'll be able to monitor my positions throughout the week. If you're a once-a- week or month "set it and forget it" style trader, this ETF may not be for you.
In it for the long-haul...Even though I didn't open a new options positions this week, as always, I held true to the dollar-cost average (DCA) method and bought a few shares each of SPY, QQQ, SCHD. The DCA method allows me to check my uncertainty at the door about whether now is a good time buy or not, especially with so much perceived uncertainty right now. Who knows if the market will go up, down, or sideways? All I know is I'll continue to be disciplined about saving and investing no matter what.
Steve's trades this week
Catch ya next week!... Steve was traveling this week and didn't make any new trades. Fortunately, his existing options positions will continue to earn money for him thanks to theta time decay even when he's not actively trading. He'll be back with us next week!
As always, tweak these positions to whatever you feel comfortable with and fits your risk tolerance and investing goals.
You got this, everyone! Stay disciplined, pay yourself first, and always invest in your greatest asset—yourself. 🙌🏻
- Steve & Ben
Friendly reminders from Steve and Ben:
Check out Steve's favorite checking and savings accounts
Click here and here to see different accounts that could fit your banking needs. Offers including great sign-up bonuses and higher interest rates to let your money work harder for you.
💪💰 Do you have the power?...Based off the great recommendation from Steve and lots of folks in the CTL community, Ben recently signed up for budgeting app Empower to get a better dashboard picture of all his various accounts and has been really been enjoying how easy it is to use. If you'd like to give Empower a try, click here to check it out!
Let your money work harder for you...
I'm also getting nearly 5% APY by having my cash sit in my Fidelity account as I sell my cash-secured puts. Here's the link if you're interested in getting started!
Manage Your Cash Against Rising Costs | Compare Our Rate | Fidelity
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