Hey Investors and Traders!
Merry Christmas and happy holidays! There wasn't too much action in the overall markets this week with all the big traders on vacation. We anticipate this quiet atmosphere again next week with the new year's coming up. Here's a little look of how the overall markets performed this week:
Here are some notable price movements in the stocks we're trading:
Advanced Micro Devices AMD
Monday Open: $94.25
Friday Close: $91.81
Microsoft MSFT
Monday Open: $217.55
Friday Close: $222.75
Apple AAPL
Monday Open: $125.02
Friday Close: $131.97
Trade of the Week:
Some of you who sold covered calls last month and had their expiration dates set to last Friday most likely had their shares called away with some possible extra capital gains made. If this is the case, go ahead and restart your Wheels and continue to take in premium.
Below are some Wheel Strategy recommendations. Feel free to choose how you want to enter your Wheel on Monday based on your personal risk-tolerance.
Starting a New Wheel: Selling a Cash-Secured Put on MSFT
- MSFT's Current Price: $222.75
- Capital needed: $22,250.00
- Sell at the Expiration Date: 2021-01-22
- Select the Strike: $222.50
- Premium you'll receive: $607.50
- Cost basis: $222.50 - $6.08 = $216.43
Starting a New Wheel: Selling a Covered Call on MSFT
- MSFT's Current Price: $222.75
- Capital needed: $22,275.00
- Sell at the Expiration Date: 2021-01-22
- Select the Strike: $225.00
- Premium you'll receive: $530.00
- Cost basis: $222.75 - $5.30 = $217.45
Starting a New Wheel: Selling a Cash-Secured Put on AMD
- AMD's Current Price: $91.81
- Capital needed: $9,150.00
- Sell at the Expiration Date: 2021-01-22
- Select the Strike: $91.50
- Premium you'll receive: $450.00
- Cost basis: $91.50 - $4.50 = $87.00
Starting a New Wheel: Selling a Covered Call on AMD
- AMD's Current Price: $91.81
- Capital needed: $9,181.00
- Sell at the Expiration Date: 2021-01-22
- Select the Strike: $92.00
- Premium you'll receive: $462.50
- Cost basis: $91.81 - $4.62 = $87.19
Starting a New Wheel: Selling a Cash-Secured Put on AAPL
- AAPL's Current Price: $131.97
- Capital needed: $13,100.00
- Sell at the Expiration Date: 2021-01-22
- Select the Strike: $131.00
- Premium you'll receive: $457.50
- Cost basis: $131.00 - $4.58 = $126.42
Starting a New Wheel: Selling a Covered Call on AAPL
- AAPL's Current Price: $131.97
- Capital needed: $13,197.00
- Sell at the Expiration Date: 2021-01-22
- Select the Strike: $132.00
- Premium you'll receive: $520.00
- Cost basis: $131.97 - $5.20 = $126.77
Starting a New Wheel: Selling a Cash-Secured Put on NKE
- NKE's Current Price: $141.60
- Capital needed: $14,100.00
- Sell at the Expiration Date: 2021-01-22
- Select the Strike: $141.00
- Premium you'll receive: $360.00
- Cost basis: $141.00 - $3.60 = $137.40
Starting a New Wheel: Selling a Covered Call on NKE
- NKE's Current Price: $141.60
- Capital needed: $14,160.00
- Sell at the Expiration Date: 2021-01-22
- Select the Strike: $142.00
- Premium you'll receive: $375.00
- Cost basis: $141.60 - $3.75 = $137.85
Our bias is pretty bullish right now, especially with the new year on its way. There is typically positive sentiment in January and many investors are excited to enter the markets again. Also, looking at the current climate with the presidential election behind us and vaccines coming out, a lot of the fear in the markets are slowly tapering down.
If you are new to the markets, we encourage you to start your Wheels by selling CSPs, 1-3 strikes OTM, around 4 weeks out. If you're more experienced and thirsty for a little more risk, you can restart your Wheels with CCs, 1-3 strikes OTM, around 3-4 weeks out.
An Apple a Day...
There was a lot of exciting news that came out on Apple AAPL this week, in particular with them entering the electric vehicle arena. Apple may work with a manufacturing partner to produce their new vehicles, and is developing next level battery technology to extend range and efficiency. Rumors are that these vehicles, under the code name "Titan," will be released sometime in 2024. Knowing Apple's history of being innovative and market disruptors with their high-end, premium products, this may be a good opportunity for this tech giant to go toe-to-toe with Tesla TSLA.
Let's take a look down memory lane. Do you remember when smartphones used to look like this...
And then Steve Jobs introduced the first iPhone in 2007 with breakthrough touchscreen capabilities...
Earnings
That's right! It's that time again for report cards to be handed out. Here are some earnings dates to be mindful of as we enter into the new year. Remember that some of these dates are subject to change.
AMD | January 26, 2021
MSFT | January 26, 2021
MA | January 27, 2021
V | January 27, 2021
AAPL | January 28, 2021
AMZN | January 28, 2021
FB | January 28, 2021
PYPL | February 1, 2021
EL | February 1, 2021
SQ | February 4, 2021
HD | February 16, 2021
Discord Launched!
Like what we mentioned this and last week, we launched our Discord, so make sure to sign up to talk to others in our wealth-building community.
Portfolio Allocation
It might be a good time to look at your portfolio allocation as we get closer to the end of the year. Right now, if you're in wealth building mode, we recommend having a stronger emphasis on long-term holding stocks. As fun as it is to use the Wheel Strategy, you can be taxed short-term capital gains, where Uncle Sam may take a larger cut come tax season.
If your account is capable and you have a regular individual cash-account, you can consider splitting your portfolio into thirds:
1/3 S&P500 and/or DOW30 Long-Term, Dividend-Paying Stocks/ETFs like V, HD, and VTI
1/3 S&P500 and/or DOW30 Long-Term Growth Stocks like SQ, PYPL, FB, AMZN, ADBE, COST, and MA
1/3 S&P500 and/or DOW30 Wheel Strategy Stocks/ETFs like MSFT, AAPL, NKE, and AMD
We emphasized more on the Wheel Strategy the past 6 months to profit from the market volatility, election and pandemic uncertainty, and how many of our favorite stocks we were trading were caught within a neutral range, which using the Wheel Strategy is most powerful.
However, if you are in income-generating mode, you can of course shift your allocation into more of the Wheel Strategy. Again, be mindful of the tax-implications when you buy and sell shares under a year's worth of time.
Alright friends! Merry Christmas, happy holidays, and have a wonderful New Year! See you next week! 🥂
- 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.