by Ben Weiss, for the Call to Leap Team
Ben’s trades this week
Goin' up?...I bought-to-close my cash-secured puts (CSP) in AMZN. Following AMZN's big day on Friday, the option had decayed 95% in value, and with another week left to go until expiration, I wasn't about to wait around to pocket the final $5 in profit. Remember: you can always choose to close out your call and put options early especially when they depreciate in value 50% or more if you want to lock in your profit and take the risk off the table.
I also took the opportunity to "roll out and up" my covered call in AAPL. It was expiring next week, and I used the higher implied volatility (IV) environment before AAPL's earnings report to roll the call out to March 15 and up from $190 to $195. Even though the stock has declined a little following earnings this week, I am bullish on the stock and want to allow more room for the stock to grow before my shares are potentially called away.
Trade 1: AAPL cash-secured put (CTL Level 1)
Expiration Date: March 15, 2024 (a "monthly" expiration)
Step 1: Have $19,000 cash as collateral
Step 2: Sell 1 $190 strike put option (delta 0.60) for $6.75/share
Credit/premium received: $675/contract (minus fees and commissions)
Thoughts: I opened this option when AAPL was trading closer to $190 (closer to at-the-money). With AAPL's drop since, I might've also chosen the $185 strike to be more conservative. However, I am bullish on AAPL overall, especially if it's able to stick within the upward trading channel shown above until expiration.
Trade 2: GOOGL cash-secured put (CTL Level 1)
Expiration Date: March 15, 2024 (a "monthly" expiration)
Step 1: Have $14,000 cash as collateral
Step 2: Sell 1 $140 strike put option (delta 0.37) for $2.90/share
Credit/premium received: $290/contract (minus fees and commissions)
Trade 3: GIS (General Mills) cash-secured put (CTL Level 1)
Expiration Date: March 15, 2024 (a "monthly" expiration)
Step 1: Have $6,250 cash as collateral
Step 2: Sell 1 $62.50 strike put option (delta 0.26) for $0.70/share
Credit/premium received: $70/contract (minus fees and commissions)
Pros & Cons of trading GIS: I like being able to sell options on a smaller-priced stock in my smaller account as it requires less cash to sell a cash-secured put (or to own 100 shares and sell a covered call) compared to the more expensive AAPL, GOOGL, AMZN, AMD, etc., making it a more accessible entrance into the Wheel Strategy.
Remember: Be aware that more modest stocks like GIS can have lower IV which means you'll earn less premium as a trade off for lower volatility. It's like car insurance costing less for a standard 4-door sedan than an exotic sports car. As always, you'll want to decide if the reward is worth the risk for you. If you want to stick to trading options in AAPL and other similar popular companies, you can consider investing in S&P 500 stocks and broad-based ETFs like SPY and QQQ first to grow your balance and consider trading options in higher-priced stocks in the future.
Investing like clockwork...As always, I held true to the dollar-cost average (DCA) method and bought a share each of SPY/VOO and QQQ. The DCA method allows me to check my uncertainty at the door about whether now is a good time buy or not. I like to stick to my schedule and buy a small number of shares regardless of the markets movement that week to keep me on track long term.
Steve's trades this week
Trade 1: GOOGL cash-secured put (CTL Level 1)
Expiration Date: March 8, 2024 (a "weekly" expiration)
Step 1: Have $14,100 cash as collateral
Step 2: Sell 1 $141.00 strike put option (delta 0.40) for $2.81/share
Credit/premium received: $281/contract (minus fees and commissions)
Thoughts: I chose a shorter expiration date than Ben's GOOGL sold put and a slightly higher strike price. I think GOOGL is hitting a support line at about $141, but I decided to go a little further out in time than I may otherwise to capture more extrinsic value. We'll look to close these positions out early hopefully!
Keep 'em coming... Following encouraging signs from the market this week, I purchased more shares of my favorite ETFs, including SPY, QQQ, and SCHD. I'll look to buy some individual stocks next week following a peek into earnings reports and Smart Money's reactions.
As always, tweak these positions to whatever you feel comfortable with and fits your risk tolerance.
Friendly reminders from Steve:
Let your money work harder for you...
I'm also getting a 5% APY by having my cash sit in my Fidelity account as I sell my cash-secured puts. Here's the link if you're interested in getting started!
Manage Your Cash Against Rising Costs | Compare Our Rate | Fidelity
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