Hey Investors and Traders!
It looks like the markets did it again and the S&P500 hit another record high! What does this mean? Most likely, it looks like investors are showing confidence in the markets as more positive news on vaccines are coming out. There seems to be optimism that pre-COVID normalcy may be coming back.
The market ended with a strong November and the Dow 30 rose 11.8%, its biggest monthly gain since 1987! The S&P 500 and Nasdaq had their best months since April, and rose 10.8% and 11.8%, respectively! 🎉
Healthcare stocks and semiconductors were this week's winners, with Pfizer jumping an incredible 8.35% this week. Now before you get too excited, we strongly do not recommend investing in pharmaceutical companies since they are incredibly volatile and are most often traded based on news. Don't get sidetracked by shiny objects and stick with the companies that are actually making consistent revenue as these are the companies that will move forward in the future.
Here are some notable price movements in the stocks we're trading:
Advanced Micro Devices AMD
Monday Open: $87.33
Friday Close: $94.04
Microsoft MSFT
Monday Open: $214.10
Friday Close: $214.36
Apple AAPL
Monday Open: $116.97
Friday Close: $122.25
Trade of the Week:
Woohoo! It looks like we had a bit of a mixed bag of expiring contracts this past Friday. Some may have expired worthless, while others may have forced you to sell your shares. Here were the trades that we posted on our Membership Positions on November 8.
It looks like AMD ripped up this week, along with its other semiconductor brothers and sisters, and closed right at its previous all-time high! This means that your CSP expired worthless, of if you were in a covered call trade, your shares were called away and you might have even made some extra capital gains. If that's the case, you can re-enter the Wheel again on Monday and sell another CSP to collect more premium.
The same goes with APPL! If you sold a CSP and it expired worthless, you can keep spinning that cash wheel and sell another CSP this upcoming Monday.
Your MSFT, however, may have expired ITM, causing you to be assigned 100 shares. You can now sell a covered call on either the same or 1 strike above the strike price you initially sold your CSP, 4 weeks out.
Below are some Wheel Strategy recommendations. Feel free to choose how you want to enter your Wheel:
Starting a New Wheel: Selling a Cash-Secured Put on MSFT
- MSFT's Current Price: $214.36
- Capital needed: $21,250.00
- Sell at the Expiration Date: 2020-12-31
- Select the Strike: $212.50
- Premium you'll receive: $460.00
- Cost basis: $212.50 - $4.60 = $207.90
Starting a New Wheel: Selling a Cash-Secured Put on AMD
- AMD's Current Price: $94.04
- Capital needed: $9,400.00
- Sell at the Expiration Date: 2020-12-31
- Select the Strike: $94.00
- Premium you'll receive: $470.00
- Cost basis: $94.00 - $4.70 = $89.30
Starting a New Wheel: Selling a Cash-Secured Put on AAPL
- AAPL's Current Price: $122.25
- Capital needed: $12,200.00
- Sell at the Expiration Date: 2020-12-31
- Select the Strike: $122.00
- Premium you'll receive: $375.00
- Cost basis: $122.00 - $3.75 = $118.25
If you're just starting out your Wheel, you might want to be a little bit more conservative and sell 1-2 strikes OTM CSP, just in case the stocks drop.
However, if you've been with us for a while, you can consider entering your Wheel with a covered call and sell a call 1-2 strikes OTM. When you sell a little bit more OTM calls, you have the potential to collect some capital gains if you're shares are called away. We're a little bit more bullish about the markets and think the rally may continue until the end of December. It seems that market sentiment is much higher and we can ride the wave up.
Something We're Eyeing
It looks like Nike NKE has been back in our radar again. The company reported to increase it's dividends by 12%, meaning that the company is still going strong and comfortable with rewarding shareholders. Though there was an earnings slump earlier this year due to the pandemic, NKE has been doing extremely well with their digital sales. Not only that, with Biden being the president-elect, the US may have better relationships with China and phase out some tariffs when he steps into the Oval Office.
The next NKE earnings date is currently reported to be on December 18. Let's keep an eye out and see how they do. If they have another quarter of positive results, it may give us the green light to go back into the stock again.
Level II: LEAPs Trading and Investing
Our team has been working hard over the past couple of months and we are excited to let you know that we are launching our Level II series on December 18! In this video series, we're going to teach you how you can exponentially grow your account by trading and investing in Long-Term Equity Anticipation Securities, or LEAPs for short.
In order to prepare you for this, we ask that you already have experience in investing for the long-term, collecting dividends, and selling covered calls and cash-secured puts. You may also want to deposit more capital into your brokerage account as you will need more dough to get started. Finally, you will also need to be cleared for Level II options trading in your brokerage platform.
Also, with some exciting news, our team has decided to upgrade all Standard Members (yes, that's you) to becoming Premium Members, so you will have access to this series and be able to ask us questions on Level I and II content. Questions for future Standard Members will only be able to ask us about Level I concepts and have their questions answered in the Weekly Ask Steve videos. But since you have been loyal members and have stuck with us for a while, we want to thank you by giving you Premium access to ask us questions more directly. As long as you're a Standard Member before December 16, you'll be upgraded to the Premium tier and will be grandfathered in with the special membership pricing that you have now. We just thought that since it's the holiday season, we would do a little something special for you. 😉
Have a wonderful week and stay safe and healthy, gang!
- 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.