The markets had a mixed week with the DOW30, S&P500, and NASDAQ end 2.1%, 0.7%, and -0.6%, respectively.
Overall, the market had a slight pullback, which are often healthy after a long bullish run.
After seeing NFLX and TSLA drop after earnings this week, it could be a sign that other stocks could follow suit.
Steve's Trades
Earnings Season ⚠️⚠️⚠️
Just wanted to remind everyone that earnings season has already started. For some of our stocks that we trade and invest, we should take note of when these earnings are happening.
Microsoft Corp (MSFT) - Tuesday, July 25, 2023
Alphabet Inc (GOOGL) - Tuesday July 25, 2023
Advanced Micro Devices Inc (AMD) - Tuesday, August 1, 2023
Apple Inc. (AAPL) - Thursday, August 3, 2023
Amzon.com Inc (AMZN) - Thursday, August 3, 2023
Volatility is increasing as we speak, so it's perfectly fine to skip this week's trades if you're uncomfortable taking the risks. However, if you wanted to take on a trade, you can consider trading GOOGL on Tuesday, July 25, 2023, an hour before market close.
GOOGL Trades
I'm planning on setting up a bear call spread on GOOGL to take advantage of the high IV during their earnings call.
The goal is to let IV crush the option contracts right after earnings are released.
If this happens, you can buy to close your positions to lock in your profits.
Just remember that GOOGL could still also rise after earnings, which means we still want to be a long-term bull on the stock. If you aren't, this stock is not for you to trade.
GOOGL Bear Call Spread
Expiration Date: August 25, 2023
Step 1: Sell 1 $131 strike call option (delta 0.23) for $137
Step 2: Buy 1 $160 strike call option (delta 0.02) for $16
Credit/premium received: $121
BSO: Create a buy stop order of 100 shares at $130
If we see GOOGL start to go up towards $131, you can create a Buy Stop Order (BSO) of 100 shares priced at $130 each. You will convert this into a covered call, as we've sold a call at $131. You can also close the $160 strike call option that you previously bought as the first leg.
As always, you can always scale your spreads if your account size allows it:
1 spread: $121
10 spreads: $1,210
I'm currently not buying any shares or LEAPS since IV is starting to increase. Once earnings are over, we can see which companies are the winners.
In the end, feel free to tweak any numbers and see what best fits your risk tolerance and portfolio. Remember, investing and trading is a marathon, not a sprint.
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-Steve and the Call to Leap Team
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