by Ben Weiss, for the Call to Leap Team
The S&P 500 and Nasdaq indices achieved fresh all-time highs this week, however we don't want to lose sight of recent choppy movement. I'm continuing to take a measured approach for the near term while Steve and I maintain a bullish outlook for the mid- and long-term. Check out what happened on the market this week and what's coming up.
While we've made it through May and into June with significant bullish strength overall, 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.
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Ben’s trades this week
Take it and don't look back... With a couple big up days in the Nasdaq and semiconductor sector, I took the opportunity to close all of my TQQQ (Nasdaq) and SOXL (semiconductor) puts. As long as favorable conditions continue, I'll look to re-enter these positions with fresh expiration dates about 1 month out, especially if we see a stronger down day giving us a good opportunity to enter the position for higher premiums. I was also able to close out my PYPL July 19 put over a month early for 60% profit, since the stock had a big up day on Thursday.
🚨🚨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 favorite long-term stock and index ETF holdings, which I do every week no matter how the market is behaving.
New Trade 1: EBAY cash-secured put (CTL Level 1)
Expiration Date: July 19, 2024 (a "monthly" expiration)
Step 1: Have $5,250 cash as collateral
Step 2: Sell to open 1 $52.50 strike put option (delta 0.40) for $1.14 /share
Credit/premium received: $114/contract (minus fees and commissions)
Thoughts: I'm adding +1 contract to my existing EBAY cash secured put position, as the stock looks to be trending well and has found support around the $53 level and along the green upward trend line. If you wanted to add protection to limit downside risk and/or reduce the cash collateral requirement, you could consider buying a long put with the same expiration date as the cash secured put above. This would form a bull put spread and would juice up the return on investment (ROI). I chose to buy the July 19 $45 put for protection. Note: Spreads are more advanced strategies that require monitoring more closely as expiration approaches, and also require your account be approved for margin to be able to trade. If you're not comfortable trading spreads like bear call spreads and bull put spreads yet, you can always stick to the one-leg cash secured put just as well!
New Trade 2: KO (Coca Cola) cash-secured put (CTL Level 1)
Expiration Date: June 21, 2024 (a "monthly" expiration)
Step 1: Have $6,300 cash as collateral
Step 2: Sell to open 1 $63 strike put option (delta 0.33) for $0.32 /share
Credit/premium received: $32/contract (minus fees and commissions)
Thoughts: This is a more short-term trade to hedge against any potential immediate pull back in the technology/semiconductor sectors. Coca Cola is a stable, well-established dividend-paying company that should weather market turbulence better than more volatile technology stocks, so this position adds some diversification to my options portfolio. If choosing an expiration only 12 days away is too soon, you could also consider the June 28 expiration and earn a bit more premium. As with EBAY, you could consider buying a long put with the same expiration date as the cash secured put above. This would form a bull put spread. I chose to buy the June 21 $60 put for protection. If you're not comfortable trading spreads like bear call spreads and bull put spreads yet, you can always stick to the one-leg cash secured put just as well!
New Trade 3a & 3b: TNA cash-secured put (CTL Level 1) See caution
Trade 3a:
Expiration Date: July 5, 2024 (a "weekly" expiration)
Step 1: Have $3,300 cash as collateral
Step 2: Sell to open 1 $33 strike put option (delta 0.29) for $0.90/share
Credit/premium received: $90/contract (minus fees and commissions)
Trade 3b:
Expiration Date: July 19, 2024 (a "monthly" expiration)
Step 1: Have $3,300 cash as collateral
Step 2: Sell to open 1 $33 strike put option (delta 0.29) for $1.30/share
Credit/premium received: $130/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. 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. Caution: 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.
New Trade 4: MRVL cash-secured put (CTL Level 1)
Expiration Date: July 19, 2024 (a "monthly" expiration)
Step 1: Have $6,750 cash as collateral
Step 2: Sell to open 1 $67.50 strike put option (delta 0.44) for $3.00 /share
Credit/premium received: $300/contract (minus fees and commissions)
Thoughts: The stock has been finding nice bullish support along the green upward trend line and recently created a new higher low and higher high. Given a large gap down following recent earnings, I wouldn't be surprised to see the stock climb back up and try to fill that gap.
Buying some new SOXX for the drawer... I added some shares to my holdings of semiconductor ETF "SOXX" this week. This is a non-leveraged ETF that is suitable for buying and holding long-term (unlike TQQQ, SOXL, and TNA). While I'm a big fan of buying SPY and QQQ, I wanted to buy a small amount additionally of an ETF that holds a higher concentration of NVDA ahead of the company's 10:1 stock split this weekend, in case there is a bullish surge following the split. Another semiconductor ETF option I researched was VanEck's SMH, though this fund is less diversified and is comprised of nearly 25% NVDA.
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
New Trade 1: AMZN cash-secured put (CTL Level 1)
Expiration Date: July 5, 2024 (a "weekly" expiration)
Step 1: Have $18,500 cash as collateral
Step 2: Sell to open 1 $185 strike put option (delta 0.49) for $4.35 /share
Credit/premium received: $435/contract (minus fees and commissions)
Thoughts: I sold two put contracts on AMZN with a 3-week expiration (vs. 4 weeks) because I'm a little more bullish. The $185 strike is right at the money--maybe even a little in the money now--so you could also consider the $180 or lower strikes for more downside protection as AMZN is hovering just below its all-time high, which could act as resistance from rising further.
Steady as we go...I continued adding shares to my long-term positions this week, including some of my favorite stocks like AMAT (Applied Materials) and CMG (Chipotle Mexican Grill) and one of my favorite ETFs, SPY.
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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