Hey Everyone!
Awesome! The markets soared again this week, especially with a lot of our favorite stocks making some new all-time-highs!
Here's SPY:
Here's QQQ:
Here's DIA:
Trade of the Week:
Spinning your wheels: If your covered calls expired worthless this Friday, we recommend selling more calls at around the same strike price as before to collect more premium. If you sold some cash-secured puts and they lost around 80% of their value, you can consider buying back the contracts and reselling them for a further date to collect more premium. If your cash-secured puts expired worthless, you can consider restarting your wheel by selling another cash-secured put.
Pay attention to the delta: You can always look at the delta of the call you are selling since the delta roughly approximates the probability of the price of the stock reaching the strike by expiration. If you see that the delta is 0.10, you know that there is roughly a 10% chance that the price of the stock will reach that strike price by expiration. Likewise, if you see that the delta is 0.20, you know that there is roughly a 20% chance that the price of the stock will reach that strike price by expiration.
Beginners: If you're a beginner, we recommend you starting off with selling cash-secured puts around 1-3 strikes OTM. This is typically a conservative starting point when starting the Wheel Strategy. If you have been using the Wheel Strategy for a while and have a more bullish outlook, we recommend starting your new Wheel 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.
Advanced: Since it looks like we are progressing forward in the markets, you can consider selling some shorter dated OTM covered calls, around 2-3 weeks out. We would only recommend this to members if they've been trading the Wheel for a while and have a general understanding of how theta and delta work.
Here are some trade recommendations and see what fits your personal risk-tolerance:
MSFT
Monday Open: $278.03 Friday Close: $277.94 5-day change: -0.03%
Starting a New Wheel: Selling a Cash-Secured Put on MSFT - MSFT's Current Price: $277.94 - Capital Needed: $28000.00 - Sell at the Expiration Date: 2021-08-06 - Select the Strike: $277.5 - Premium you'll receive: $685.00 - Cost Basis: $277.50 - $6.85 = $270.65
Starting a New Wheel: Selling a Covered Call on MSFT
- MSFT's Current Price: $277.94
- Capital Needed: $27794.00
- Sell at the Expiration Date: 2021-08-06
- Select the Strike: $280
- Premium you'll receive: $780.00
- Cost Basis: $277.94 - $7.80 = $270.14
AAPL
Monday Open: $140.07
Friday Close: $145.11
5-day change: 3.59%
Starting a New Wheel: Selling a Cash-Secured Put on AAPL - AAPL's Current Price: $145.11 - Capital Needed: $14600.00 - Sell at the Expiration Date: 2021-08-06 - Select the Strike: $145 - Premium you'll receive: $475.00 - Cost Basis: $145.00 - $4.75 = $140.25
Starting a New Wheel: Selling a Covered Call on AAPL
- AAPL's Current Price: $145.11
- Capital Needed: $14511
- Sell at the Expiration Date: 2021-08-06
- Select the Strike: $146
- Premium you'll receive: $422.00
- Cost Basis: $145.11 - $4.22 = $140.89
AMD Monday Open: $94.88 Friday Close: $90.90 5-day change: -4.18%
Starting a New Wheel: Selling a Cash-Secured Put on AMD - AMD's Current Price: $90.90 - Capital Needed: $9100.00 - Sell at the Expiration Date: 2021-08-06 - Select the Strike: $90.5 - Premium you'll receive: $438.00 - Cost Basis: $90.50 - $4.38 = $86.12
Starting a New Wheel: Selling a Covered Call on AMD
- AMD's Current Price: $90.90
- Capital Needed: $9090.00
- Sell at the Expiration Date: 2021-08-06
- Select the Strike: $91
- Premium you'll receive: $435
- Cost Basis: $90.90 - $4.35 = $86.55
NKE Monday Open: $159.92 Friday Close: $161.00 5-day change: 0.67%
Starting a New Wheel: Selling a Cash-Secured Put on NKE - NKE's Current Price: $161.00 - Capital Needed: $16250.00 - Sell at the Expiration Date: 2021-08-06 - Select the Strike: $160 - Premium you'll receive: $432.00 - Cost Basis: $160.00 - $4.32 = $155.68
Starting a New Wheel: Selling a Covered Call on NKE
- NKE's Current Price: $161.00
- Capital Needed: $16100.00
- Sell at the Expiration Date: 2021-08-06
- Select the Strike: $162.5
- Premium you'll receive: $289.00
- Cost Basis: $161.00 - $2.89 = $158.11
PINS Monday Open: $79.40 Friday Close: $76.99 5-day change: -3.03%
Starting a New Wheel: Selling a Cash-Secured Put on PINS - PINS's Current Price: $76.99 - Capital Needed: $7700.00 - Sell at the Expiration Date: 2021-08-06 - Select the Strike: $76.5 - Premium you'll receive: $578.00 - Cost Basis: $76.50 - $5.78 = $70.72
Starting a New Wheel: Selling a Covered Call on PINS
- PINS's Current Price: $76.99
- Capital Needed: $7699
- Sell at the Expiration Date: 2021-08-06
- Select the Strike: $77
- Premium you'll receive: $543.00
- Cost Basis: $76.99 - $5.43 = $71.56
SBUX Monday Open: $115.08 Friday Close: $117.47 5-day change: 2.07%
Starting a New Wheel: Selling a Cash-Secured Put on SBUX - SBUX's Current Price: $117.47 - Capital Needed: $11800.00 - Sell at the Expiration Date: 2021-08-06 - Select the Strike: $117 - Premium you'll receive: $282.00 - Cost Basis: $117.00 - $2.82 = $114.18
Starting a New Wheel: Selling a Covered Call on SBUX - SBUX's Current Price: $117.47 - Capital Needed: $11747.00 - Sell at the Expiration Date: 2021-08-06 - Select the Strike: $118 - Premium you'll receive: $328.00 - Cost Basis: $117.47 - $3.28 = $114.19
Ask Steve
Let's see what some of our members asked this week. Here are the top questions we received:
Matthew
Q: I have an Apple CC expiring on 7.12. The stock was lower 4 weeks ago and I set the Strike Price at 127.00. Apple is now at 137.00. Do you suggest I roll out since the stock went way up? Or let my shares get called away at 127.00?
A: Wonderful question! We would recommend letting the shares get called away. Our goal is to be consistent with generating income each month. Remember, you already are the winner in this situation since you profited from both the premium and capital gains. If you are concerned with your underlying stock moving up quickly, you can always consider selling further OTM strikes or even pair your Wheel with a LEAPS option or extra shares on the side.
Jeremy
Q: I wanted to confirm whether that the terminology "Naked Put" is the same as a CSP? Thanks
A: Great question! No, selling naked puts and cash-secured puts are different as it is written in the names of the strategies. When you sell a naked put, you do not have the funds to cover yourself to buy Craig's shares. When you sell a cash-secured put, you do have the funds to cover yourself to buy Craig's shares. We strongly do not recommend selling naked puts as this can potentially lead to massive losses, especially if you are using margin.
Jonathan
Q: In a previous Membership Position, Steve mentioned he was considering moving away from PINS. Does he still recommend PINS now? It looks like he does since they are still included on the weekly position recommendations.
A: Good question! Yes, we still recommend trading PINS right now. When PINS had a correction, we recommended to sell lower strike prices at around their cost basis if members entered PINS at a higher price. We are still bullish on PINS and see growth in the company's top-line revenue in the future.
Juliette
Q: I wanted to start selling a CSP with AAPL but what is the advantage over AMD where the premium is greater and the capital needed is less.
A: We believe both are great companies. Although the capital needed to start an AMD wheel is lower than AAPL, AMD can be more volatile. Because it is more volatile, the premium can be higher. Yes, it costs less to start and offers a higher premium which can be attractive, but because it has higher implied volatility, it can drop significantly during a pullback/correction (Not to say that AAPL can't either, but APPL tends to have lower volatility). For example, currently looking at the 8/6/21 expiration date on the option chains for AMD and AAPL, AAPL has an implied volatility of 29.93% while AMD has an implied volatility of 45.97%. AAPL also pays a dividend while AMD does not pay a dividend.
Arinda
Q: Is there any guidance on the CalltoLeap platform regarding how to open a brokerage account? I do not have one yet but intend to have the intention to start investing soon.
A: Check out our Level 1 lessons and the video called "Getting started and allocation." We talk a little about the application process. In regards to specific brokerage accounts, we personally like Charles Schwab and TD Ameritrade. You can choose an account type like a cash account or a retirement account. If you have never invested before you can consider opening up a Roth IRA. This is a great retirement account as you can get the benefit of tax free capital gains. Next, you deposit some money by linking your bank account. Lastly, you can buy some stocks and ETFs like MSFT, QQQ, VTI, V, AAPL, V, & MA to name a few. Continue to buy stocks and ETFs monthly! Be patient and diligent in investing and you'll see your money compound over time.
Manuel
Q: Do I receive this premium once the operation expires (at expiration) or once the contract is sold?
A: Great question! When you sell a cash secured put or a covered call, you should receive the premium upfront. The premium is yours to keep regardless of where the underlying stock price expires.
Anjali
Q: I was looking through your instagram and there is a video where you say to open a tdameritrade Roth IRA account? What would be the difference between that and a regular TD Ameritrade account? If there is a difference would you suggest I open a TD Ameritrade Roth IRA account as well?
A: Awesome question! You can choose an account type like a cash account or a retirement account. If you have never invested before you can consider opening up a Roth IRA. This is a great retirement account as you can get the benefit of tax free capital gains upon withdrawal at 59.5 years old. The difference between a cash account and a Roth IRA is that with the Roth IRA, it is pre-taxed income when you put it in there and therefore when you pull it out at retirement you won't be taxed. This allows your investments to grow "tax free". The cash account is more liquid in a sense and you can use it for monthly income. The great thing is that you can have both a cash account and a Roth IRA! Think of these accounts as individual cups. You can trade within a cup and it will stay within that account. We don't advise with taxes and therefore we recommend seeking out professional tax services. It is completely up to which accounts you would like to open!
Trevor
Q: In regards to managing an investment portfolio. Should these strategies be applied to an (Roth) IRA or an individual margin/cash account? Especially in regards to reaching Financial Independence Retiring Early. Ideally with a time horizon of ~ 10-15 years.
A: Great question! How you manage your portfolios and what you decide to do is completely up to you. These strategies can be applied to both accounts with their own pros and cons respectively. For financial independence, If you'd like to utilize the wheel to generate monthly income to fund your life expenses, you can consider the utilizing a cash account. If you'd like to let your investments grow "tax free" and not pull it out until retirement you can consider utilizing a Roth IRA. We can't advise on taxes and we recommend seeking out professional tax services.
Jae
Q: I definitely see the value in this technique since I did sell a MSFT cash secured put and profited about $500 when it expired worthless at the end.
I think it worked because I somehow caught the bottom when it hit $240 during the correction. But I'm not confident to do the same at this point as the market is at high levels and can start a correction any time soon.
A: Good question! We understand that it may seem that MSFT is high in price right now. You can consider waiting for the stock to pull back before entering the Wheel again or you can consider selling a CSP a little further OTM. But from a historical and mathematical perspective, the averages typically play out in the long-term and it doesn't matter too much on when you enter the stock.
If you think MSFT is going to significantly pull back, you can also consider setting up a bear call spread (which is learned in the Premium Membership).
Submit Your Questions 🙋♂️🙋♀️
Have any other 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. 😊
If you do have questions, make sure to ask them on our Dashboard, rather than asking us via email. We also encourage you to watch all of the core video content and some of the past archived videos, read past Membership Positions, and take all the quizzes before sending us your questions.
Technical Analysis 📈📉
Similar to last week, institutional money is coming back into the markets and pushing many of our favorite stocks higher. As we progress forward into the third quarter, we want to make sure that you have a balanced 30/30/30/10 portfolio. I know it's fun and everyone thinks they're a genius during a bull market. However, not if, but when a market pullback or correction happens, we want to make sure that your portfolios are safe and that you are emotionally ready for it.
PINS:
PINS has been steadily climbing back up over the past several weeks. As you can see, PINS is still well above it's upwards trendline and is about to retest its all-time highs of around $90. Hopefully with the company's earnings coming up in a couple of weeks, it will be a catalyst for the stock to move higher. If you are trading this stock, you'll notice that this stock is very volatile and the premiums are much higher. This indicates that IV is rising and that a big move is anticipated in the stock. If you are a beginner, we would probably sit on the sidelines right now and see how they do for their next quarterly report. If they do well and Wall Street rewards them for it, then it may give us the green light to jump back into the stock.
V:
With V being a reliable company, this stock is still slowly climbing up and making more all-time highs. From a technical perspective, V is coming to the end of its triangular wedge and may be ready to break out.
AMD:
AMD has been trending neutrally for about a year. However, it might be time for the stock to finally break out from it's all-time highs of around $100 when the company delivers their quarterly reports. Just like PINS, this stock is very volatile and institutions don't mind selling their shares whenever there is uncertainty in the news. If you're trading the Wheel on AMD, buckle up and hold on!
AAPL:
AAPL is hovering around its all-time highs. We can see that the stock is trending well above it's upward trendline. Though we only have two data points to create a resistance line, it's possible that AAPL is going to make some new all-time highs and hit somewhere around $155 in the short-term.
MSFT:
MSFT is still marching on and making new all-time highs. This week, it looks like the stock hit it's upward resistance line and may take a little breather before moving higher again.
AMZN:
Ah finally! Quarter after quarter of delivering great reports, AMZN has finally broken out of its channel and made a new all-time high. This breakout is most likely going to form a new bullish trend for the stock.
How Are You Doing?
To make sure our coaches and I keep you on track on your journey to financial freedom, here are some things to keep in mind as we move forward to the last half of 2021.
✅ I have a balanced 30/30/30/10 portfolio that fits my personal risk tolerance.
✅ I only invest in stocks that I understand and have consistent revenue growth.
✅ I am depositing money into my brokerage account every month to make sure I pay myself first.
✅ I use the premiums that I generate from my Wheels and cash that I deposit to slowly buy more long-term holding shares that most likely pay a dividend. This will help me compound my portfolio faster.
✅ I keep track of my trades to see how much money I make each month.
✅ I understand that markets will always have volatility. I am not afraid when there is a pullback or correction because I know this is normal in the stock market.
✅ I am not obsessed and fixated on my portfolio value on my screen.
✅ I am patient.
✅ I make it a habit to read wealth building books to help develop my wealth mindset.
✅ I surround myself with encouraging people with positive, wealth mindsets. I stay away from negative people.
✅ I review the educational material found here and am not shy to ask questions when I don't understand because I know there is a community here to support me.
Earnings 📑
That's right folks. Another round of earnings are coming up towards the end of July. If you are trading the Wheel Strategy, we recommend that you keep these earnings dates in mind. You'll start to notice that your premiums are going to get slightly bigger since the extrinsic portion of your options will be inflated from the higher IV.
Remember that at Call to Leap, we only invest and trade in stocks that have strong fundamentals and that we understand the companies we invest in. We never invest based off of hype because this is the quickest way to lose money and to damage your wealth mindset. We want to see the stock market as a vehicle to grow wealth, not a gambling ticket.
Join Our Discord 💬
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. Coming from a teacher's perspective, I believe it's important to engage in conversations with people who are also seeking to reach financial freedom.
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.
Have a wonderful weekend!
-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.
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