by Ben Weiss, for the Call to Leap Team
The S&P 500 and Nasdaq indices once again achieved fresh all-time highs this week, however I'm continuing to take a measured approach for the near term as I explore in this week's Market News & Outlook.
Steve and I maintain a bullish outlook for the mid- and long-term, but we're choosing not to open many big positions this week and instead building a bit more cash reserves in case attractive opportunities pop up with a market pullback. We're also investing in some long-term shares to continue building our positions in our favorite stocks and ETFs over time.
⚠️⚠️The stocks/ETFs we traded this week are leveraged and riskier in nature. If leveraged ETFs and more volatile stocks aren't your style (totally ok!) and you're waiting for the market choppiness to settle down, now could also be a good time to build up your cash reserves or invest in your favorite long-term stock and index ETF holdings, which we do every week no matter how the market is behaving.⚠️⚠️
While we've made it through May and into June with significant bullish strength overall, summer months have historically been lower-performing months for the market. At CTL, Steve and I follow the dollar-cost average approach and try not to "time the market" and its ups and downs, however we shouldn't be surprised if we see a bit of slow down ahead. Overall, I'm with many investors in being bullish for the remainder of 2024, but we'll pay attention to the market trends and use the various tools in our options trading toolbox as needed.
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Ben’s trades this week
Well that escalated quickly... The S&P 500 and Nasdaq both gapped up significantly on Wednesday, giving us a great opportunity to close many of our bullish cash secured puts early for 50, 75, or even 90%+ profit. To close my puts in TNA, I took these steps:
Step 1: Buy to close 1 July 19 $33 strike put option
Reserved cash collateral released back to me: $3,300/contract
I also bought to close my July 5 $33 (same strike, different expiration) as the ETF continued to rise up. This released an additional $3,300 back to me.
I also closed my put in MRVL that had a month left until expiration. The put had decayed about 50% of its original value (generally my minimum profit threshold to BTC early), but it decayed very rapidly--in only 5 days since opening--so it was a quick opportunity to lock in profit. We very easily could have kept this put open longer to collect more profit--your choice!
Step 1: Buy to close 1 July 19 $67.50 strike put option
Reserved cash collateral released back to me: $6,750/contract
Keep on wheeling... I closed my 2 covered calls in CMCSA this week. With 1 week left to expiration, I could have also allowed them to expire worthless, however they had already achieved 95%+ profit, and I can use a potential up day this coming week to sell my next round of covered calls with a July or August expiration. Stay tuned!
Step 1: Buy to close 1 each of June 21 $40 and $42.50 strike put options
I maintain ownership of 100 shares of CMCSA per call contract (200 total) and will look to sell next round of covered calls shortly to further lower my shares' cost basis.
New Trade 1: TNA cash-secured put (CTL Level 1) See caution below
Expiration Date: July 12, 2024 (a "weekly" expiration)
Step 1: Have $3,100 cash as collateral
Step 2: Sell to open 1 $31 strike put option (delta 0.21) for $0.77/share
Credit/premium received: $77/contract (minus fees and commissions)
Thoughts: I actually sold 2 separate cash secured puts on TNA, one at the $31 strike and one at the more conservative $30 strike. TNA showed a significant decline this week as Smart Money was focused more on buying big tech, however exposure to small market capitalization companies can be a good diversification to many of the large and mega cap companies we often trade and invest in. TNA is a 3x leveraged ETF that tracks the Russell 2000 "Small Cap" index, comprised of the 2000 smallest companies on the greater Russell index. Similarly to TQQQ and SOXL, this ETF moves very fast, both up and down, but can also be a less capital intensive way to get exposure to the small cap sector, compared to IWM and other more expensive ETFs. I only trade volatile leveraged ETF when I'm confident I'll be able to monitor my positions throughout the week. If you're a once-a-week or month "set it and forget it" style trader, this ETF may not be for you. 🚨🚨Caution: trading options on leveraged ETFs is a more advanced and risky strategy and not for everyone, especially beginners not yet comfortable with buying-to-close (BTC) and rolling options. Please consider/tweak these positions as they fit your risk tolerance and trading style.🚨🚨
New Trade 2: CELH cash-secured put (CTL Level 1)
Expiration Date: July 19, 2024 (a "monthly" expiration)
Step 1: Have $5,000 cash as collateral
Step 2: Sell to open 1 $50 strike put option (delta 0.13) for $0.77/share
Credit/premium received: $77/contract (minus fees and commissions)
Thoughts: I originally sold a CELH cash secured put at the $60 strike earlier in the week, however the stock continued to decline. If I were to open the put now, I might choose a more conservative strike, possibly the $50 strike indicated above. The stock price has fallen to the bottom bound of the trading channel shown above where it might find support, however it has also declined through the 100 and 200-day moving averages in the last few days with some velocity. I also added the RSI indicator to the chart above which shows potential oversold territory and bullish reversal. ⚠️⚠️Considering all these mixed data, this is a risker trade idea on a more volatile stock. CELH is not part of the S&P 500 like other stocks we trade. Riskier trades like this should not make a major portion of your portfolio. If this stock or this setup is too risky for your risk tolerance or trading style, consider passing on the trade! ⚠️⚠️
In it for the long-haul... As always, I held true to the dollar-cost average (DCA) method and bought a few shares each of SPY, QQQ, SCHD. The DCA method allows me to check my uncertainty at the door about whether now is a good time buy or not, especially with so much perceived uncertainty right now. Who knows if the market will go up, down, or sideways? All I know is I'll continue to be disciplined about saving and investing no matter what.
Steve's trades this week
Considering Poor Man's Covered Calls... As my AMZN LEAPS I've held for a few weeks haven't gained profit yet, I'm considering selling covered calls against these LEAPS calls to generate income while I wait for AMZN to rise up. This strategy is called a "Poor Man's Covered Call" or a "Synthetic Covered Call" where the LEAPS call takes the place of owning 100 shares of the stock. This is a more advanced options spread strategy and requires margin approval in your brokerage account.
👩🎓📖Want to learn more about PMCCs? Let's learn together on Discord!
Steady as we go...I continued adding shares to my long-term positions this week, including some of my favorite stocks like AMAT (Applied Materials), META, AAPL, and NVDA, and my favorite ETFs, including SPY, QQQ, and SCHD.
As always, tweak these positions to whatever you feel comfortable with and fits your risk tolerance and investing goals.
You got this, everyone! Stay disciplined, pay yourself first, and always invest in your greatest asset—yourself. 🙌🏻
- Steve & Ben
Friendly reminders from Steve and Ben:
Check out Steve's favorite checking and savings accounts
Click here and here to see different accounts that could fit your banking needs. Offers including great sign-up bonuses and higher interest rates to let your money work harder for you.
💪💰 Do you have the power?...Based off the great recommendation from Steve and lots of folks in the CTL community, Ben recently signed up for budgeting app Empower to get a better dashboard picture of all his various accounts and has been really been enjoying how easy it is to use. If you'd like to give Empower a try, click here to check it out!
Let your money work harder for you...
I'm also getting nearly 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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