Hey Members!
Looks like the markets took a bit of a breather this week, with one of our favorite stocks, AAPL, taking a little dive. 😮
Here's a snapshot of how the overall markets did:
Trade of the Week:
If your covered calls expired worthless, you can sell another call against your shares at the same strike you chose last month. If you were assigned the 100 shares from your cash-secured put, you can now convert your trade into a covered call by selling at the same or 1-2 strikes above what you chose last month.
If you're trading AAPL and were assigned your shares or still have your shares from your previous covered call trade, we recommend selling at the same strike as you previously did before. This means that if you got your shares for $140 each, you can sell another covered call on Monday at the $140 strike around 4 weeks out.
If you're a beginner, we recommend you starting off with selling cash-secured puts around 1-2 strikes OTM. This is typically a conservative starting point when starting the Wheel Strategy. However, if you're more experienced, bullish about the markets, and have been using the Wheel Strategy for some time, we recommend restarting by selling a covered call around 1-3 strikes OTM to not only receive the premium, but also make capital gains if you are called away at expiration.
Here are some trade recommendations and see what fits your personal risk-tolerance:
MSFT: Tuesday Open:$244.47 Friday Close:$240.97 Change: -1.43%
Starting a New Wheel: Selling a Cash-Secured Put on MSFT - MSFT's Current Price: $240.97 - Capital needed: $24,000.00 - Sell at the Expiration Date: 2021-03-19 - Select the Strike: $240.00 - Premium you'll receive: $587.50 - Cost basis: $240.00 - $5.88 = $234.12
Starting a New Wheel: Selling a Covered Call on MSFT - MSFT's Current Price: $240.97 - Capital needed: $24,097.00 - Sell at the Expiration Date: 2021-03-19 - Select the Strike: $245.00 - Premium you'll receive: $457.50 - Cost basis: $240.97 - $4.58 = $236.40
AAPL: Tuesday Open:$135.49 Friday Close:$129.87 Change: -4.15%
Starting a New Wheel: Selling a Cash-Secured Put on AAPL - AAPL's Current Price: $129.87 - Capital needed: $12,750.00 - Sell at the Expiration Date: 2021-03-19 - Select the Strike: $127.50 - Premium you'll receive: $310.00 - Cost basis: $127.50 - $3.10 = $124.40
Starting a New Wheel: Selling a Covered Call on AAPL - AAPL's Current Price: $129.87 - Capital needed: $12,987.00 - Sell at the Expiration Date: 2021-03-19 - Select the Strike: $130.00 - Premium you'll receive: $415.00 - Cost basis: $129.87 - $4.15 = $125.72
AMD: Tuesday Open:$93.90 Friday Close:$89.58 Change: -4.6%
Starting a New Wheel: Selling a Cash-Secured Put on AMD - AMD's Current Price: $89.58 - Capital needed: $8,750.00 - Sell at the Expiration Date: 2021-03-19 - Select the Strike: $87.50 - Premium you'll receive: $327.50 - Cost basis: $87.50 - $3.28 = $84.22
Starting a New Wheel: Selling a Covered Call on AMD - AMD's Current Price: $89.58 - Capital needed: $8,958.00 - Sell at the Expiration Date: 2021-03-19 - Select the Strike: $90.00 - Premium you'll receive: $410.00 - Cost basis: $89.58 - $4.10 = $85.48
NKE: Tuesday Open:$143.37 Friday Close:$142.02 Change: -0.94%
Starting a New Wheel: Selling a Cash-Secured Put on NKE - NKE's Current Price: $142.02 - Capital needed: $14,000.00 - Sell at the Expiration Date: 2021-03-19 - Select the Strike: $140.00 - Premium you'll receive: $455.00 - Cost basis: $140.00 - $4.55 = $135.45
Starting a New Wheel: Selling a Covered Call on NKE - NKE's Current Price: $142.02 - Capital needed: $14,202.00 - Sell at the Expiration Date: 2021-03-19 - Select the Strike: $145.00 - Premium you'll receive: $407.50 - Cost basis: $142.02 - $4.08 = $137.95
PINS: Tuesday Open:$86.55 Friday Close:$85.90 Change: -0.75%
Starting a New Wheel: Selling a Cash-Secured Put on PINS - PINS's Current Price: $85.90 - Capital needed: $8,500.00 - Sell at the Expiration Date: 2021-03-19 - Select the Strike: $85.00 - Premium you'll receive: $492.50 - Cost basis: $85.00 - $4.92 = $80.08
Starting a New Wheel: Selling a Covered Call on PINS - PINS's Current Price: $85.90 - Capital needed: $8,590.00 - Sell at the Expiration Date: 2021-03-19 - Select the Strike: $90.00 - Premium you'll receive: $387.50 - Cost basis: $85.90 - $3.88 = $82.03
Earnings 📅
Roku | ROKU
Sitting at home and watching TV? Digital streaming has become more and more popular, especially due to the pandemic. Roku has strategically positioned itself to partner with companies such as Netflix and Disney. How? Roku gets paid by directing subscriptions to video services. So if viewers subscribes to a paid service like Disney+, Roku in turn gets a part of that revenue. Roku also launched a system that allows users to subscribe to paid channels like Showtime and Starz and then pay for all the services through one bill. While the company builds some of its own ad tech, including backend technology and its data-management platform, Roku mainly relies on vendors for ad serving and automated ad buying – where it generates the bulk of its gross profit. A number of key ways Roku makes money through its advertising and media business are selling publishers inventory, audience data access for publishers, display ads, selling ads for its own channel, email marketing, remote buttons, and deals with TV manufacturers. Essentially, the company focuses on attracting as many users as possible to use its platform and makes a profit on the engagement.
Here's a look at the 3-year chart of ROKU:
On Thursday, Roku posted a fourth-quarter profit of $67.3 million. Roku reported adjusted an EBITDA (earnings before interest, taxes, depreciation, and amortization) of $113.5 million, up from $15.1 million a year prior!
Revenue for the fourth quarter increased to $649.9 million from $411 million. The company generated $178.7 million in revenue from its player business and $471.2 million in revenue from its platform business, which includes licensing and advertising.
According to the company's letter to shareholders, they stated, “Despite a pandemic-related advertising slowdown in the U.S., our advertising business proved resilient, with Q4 Roku monetized video-advertising impressions more than doubling year-over-year, as advertisers increasingly followed users from traditional pay-TV to streaming,”
Roku’s average revenue per user was $28.76, up from $23.14 a year prior and they disclosed 51.2 million active accounts as of the fourth quarter after it added a net of 5.2 million accounts on a sequential basis. Roku users streamed 17 billion hours worth of content during the quarter. Whew, that's a lot of money from a lot of couch time!
Lastly, Roku disclosed that The Roku Channel, which aggregates ad-supported content on the platform, more than doubled its reach during the fourth quarter, with its usage growing nearly twice as fast as the overall Roku platform.
At Call to Leap, we believe that Roku ROKU is a great long-term investment. If you like the company and believe in their fundamentals, you can consider investing in a couple of shares. From looking at the price action of this stock, it tends to move in volatile swings. Remember to see if the stock fits your risk-tolerance and to slowly scale in, rather than buying a whole bunch of shares all at once.
Discord Launched! 💬
Investing, trading, and building wealth was a lonely journey for me. This is why my team and I created a Discord group for you and the other members to shares ideas and support one another. You don't have to go through it alone as we're all here to help. 😉
Make sure to check it out on the bottom of your "Dashboard" and follow the instructions on how to sign up.
Remember that we are a community of wealth builders at all different levels, so be positive, kind, and helpful to others, so we can help each other get to financial freedom much faster.
Level 1 FAQ 🙋♂️🙋♀️
Have questions? Before asking me and my team, feel free to check out our Level 1 FAQ. This FAQ is located on the Level 1 page. You might find what you're looking for. 😊
Drama with Robinhood and Reddit🚨
We don't typically like drama and getting side-tracked by news. However, if you're curious, you can read more about it here.
Have a wonderful weekend everyone! We hope everyone stays safe and warm, especially with those of you who are in the colder regions in the States. 🙏
- Steve and the 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.