Hey Investors and Traders!
Happy new year! We know that 2020 was an extremely rough year for many of us, but we finally finished it. With the pandemic and all the geopolitical events that happened, the S&P 500 finished 2020 with a gain of 16.26% for the year and closed at a record high this past Thursday! 🥳 Here's a snapshot of the markets as a whole:
Here are some notable price movements in the stocks we're trading:
Advanced Micro Devices AMD
Monday Open: $92.93
Friday Close: $91.71
Microsoft MSFT
Monday Open: $224.45
Friday Close: $222.42
Apple AAPL
Monday Open: $133.99
Friday Close: $132.69
Nike NKE
Monday Open: $142.54
Friday Close: $141.47
Trade of the Week:
If you were called away from your covered calls or if your cash-secured puts expired worthless, go ahead and restart your Wheel. If you are a beginner, we recommend you starting off with selling cash-secured puts around 1 strike OTM. However, if you are more experienced and have been using the Wheel Strategy for some time, we recommend restarting by selling a covered call around 1 strike OTM. From looking at the market sentiment, it looks like the markets are willing to move forward, which is why we are recommending to sell 3 week options now.
Starting a New Wheel: Selling a Cash-Secured Put on MSFT
- MSFT's Current Price: $222.42
- Capital needed: $22,000.00
- Sell at the Expiration Date: 2021-01-29
- Select the Strike: $220.00
- Premium you'll receive: $605.00
- Cost basis: $220.00 - $6.05 = $213.95
Starting a New Wheel: Selling a Covered Call on MSFT
- MSFT's Current Price: $222.42
- Capital needed: $22,242.00
- Sell at the Expiration Date: 2021-01-29
- Select the Strike: $222.50
- Premium you'll receive: $677.50
- Cost basis: $222.42 - $6.78 = $215.64
Starting a New Wheel: Selling a Cash-Secured Put on AAPL
- AAPL's Current Price: $132.69
- Capital needed: $13,200.00
- Sell at the Expiration Date: 2021-01-29
- Select the Strike: $132.00
- Premium you'll receive: $552.50
- Cost basis: $132.00 - $5.53 = $126.47
Starting a New Wheel: Selling a Covered Call on AAPL
- AAPL's Current Price: $132.69
- Capital needed: $13,269.00
- Sell at the Expiration Date: 2021-01-29
- Select the Strike: $133.00
- Premium you'll receive: $570.00
- Cost basis: $132.69 - $5.70 = $126.99
Starting a New Wheel: Selling a Cash-Secured Put on AMD
- AMD's Current Price: $91.71
- Capital needed: $9,150.00
- Sell at the Expiration Date: 2021-01-29
- Select the Strike: $91.50
- Premium you'll receive: $602.50
- Cost basis: $91.50 - $6.03 = $85.47
Starting a New Wheel: Selling a Covered Call on AMD
- AMD's Current Price: $91.71
- Capital needed: $9,171.00
- Sell at the Expiration Date: 2021-01-29
- Select the Strike: $92.00
- Premium you'll receive: $482.50
- Cost basis: $91.71 - $4.83 = $86.88
Starting a New Wheel: Selling a Cash-Secured Put on NKE
- NKE's Current Price: $141.47
- Capital needed: $14,100.00
- Sell at the Expiration Date: 2021-01-29
- 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: $141.47
- Capital needed: $14,147.00
- Sell at the Expiration Date: 2021-01-29
- Select the Strike: $142.00
- Premium you'll receive: $372.50
- Cost basis: $141.47 - $3.73 = $137.75
Don't Want to Be Called Away?
If you have a couple hundred shares that you're trading the Wheel Strategy on, and you are a little hesitant on letting them go, why not choose strikes that are further OTM? You won't get a lot of premium in return, but you have a higher statistical chance of keeping your shares. The chance of the current price of the stock reaching a further OTM strike is lower.
What strike should you choose? 🤔
Well, there's no bulletproof answer to this. However, based off of statistics, the sweet spot is to choose around a Delta 0.15 to a Delta 0.30 as you get the balance of not getting called away and a decent amount of premium in return. For the expiration date, the sweet spot is around 4-6 weeks out, as we know that theta decay is highest during this time frame.
Questions?
As a friendly reminder, please remember to ask us questions within our website platform, such as what you see on the screenshot below:
Some of you may ask us questions through Instagram DMs, YouTube comments, TikTok, Twitter, etc., but we mainly prioritize answering Call to Leap Members' questions through our site.
Discord Launched! 💬
Like what we mentioned over the past two weeks, we launched our Discord! 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.
Patience ✌
We've been saying this pretty much every month, but remember that trading and investing in the stock market is a test of patience. There will always be people on CNBC or social media instilling fear and doubt about the markets. Yes, it's true that we will always have pullbacks, corrections, and scary crashes and a rise of people around you shouting that it's the end of the world. However, just taking a look back at how we had one of the worst market crashes in history this year, the markets still finished the race with a 16% gain! Keep your head down and tune out all the noise because at the end of the day, the winners are the ones who are able to weather through the storms.
Let's make 2021 an amazing year!
- 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.