I’m sorry I haven’t been writing much. I’ve been working hard trying to get my account back to it’s level it was on January 1st. I must say my account is growing nicely. As of today’s close my account is down 13% after being down over 30%. So I’m very happy where I am.
I am not ready to jump back in with 2 feet, but I’m ready to stick my toes in a little. When I talk about getting back in I’m talking about longer term investments. Taking advantage of the low prices. I will continue to benefit from the fantastic premiums, I am a trader! The premiums are very high because of the high volatility. While the premiums are high I’d rather sell Calls and bring in the premiums instead of buying stock and tying up money. Or buying Calls and paying a high price for the premiums. There are a lot of good buys out there if you’re buying stock, but I feel there’s still room to go down, but maybe not! So there is a bit of a conundrum. Where do I put money if I want to start getting into long term investments and take advantage of good buys? Here’s what I’m gonna do.
I’m bringing is some really nice premiums with my Call selling. I’m gonna take some of the premiums I bring in and invest them into LEAPS. LEAPS are long term options. The ones I buy will expire on January 21, 2022. I’m only gonna buy 1 or 2 contracts instead of my normal 10 contracts. If, or when, the stock goes down I’ll buy another contract or 2 to average down. I will only buy LEAPS on stocks I really like for long term. Stocks that are way down from mid-February. Also, I’ll be looking for a premium I think is fair. The LEAPS premiums are not affected as much by the volatility as shorter term options.
Today I bought 4 LEAPS to get my strategy started. Let’s take a look. For each stock I’ll let you know the price of the stock in February before the big collapse. I’ll also let you know the price of the stock when I bought the LEAPS today. I will tell you what the Delta is. Delta is how much the premium will go up with every $1 move in the stock price. This number is very important to me.
Nvidia
I bought 1 contract of the 1/21/22 $250 Call when the price of the stock was $249. I paid a premium of $62. 1 contract is 100 shares so the total I paid was $6200. The Delta is .63. The premium of $62 will go up 63¢ for every $1 the stock goes up. The option gives me the right to buy 100 shares of NVDA any time before Jan of 2022 for $250 per shares. I can buy the stock or I can sell my option. In February NVDA had a high of 316.
Buy to Open 1 NVDA 1/21/22 $250.00 C @ $62.00
PayPal
I bought 1 contract of the 1/21/22 $95 Call when PYPL was at $91.98. I paid $18.50 ($1850). The Delta is .58. In February PYPL had a high of $124.
Buy to Open 1 PYPL 1/21/22 $95.00 C @ $18.50
Square
I bought 1 contract of the 1/21/22 $47.50 Call when the stock was at $$45. I paid $13 ($1300). The Delta is .63. In February the stock had a high of $87.
Buy to Open 1 SQ 1/21/22 $47.50 C @ $13.00
PENN Gaming
I bought 2 contracts of the 1/21/22 $10 Call when the stock was at $9.05. I paid $5.40 ($1080). The Delta is .78. In February the stock had a high of $39.
Buy to Open 2 PENN 1/21/22 $10.00 C @ $5.40
I bought all these options with premiums I brought in from trading. These do not expire for another 2 years, but there’s no way I’ll hold them that long. I’ll watch how the market is moving and make a decision when to get out. When I buy options I like to go out on the Expiration Date for protection. I don’t have to worry about Time Decay. I’m sure I’ll make money on all of these positions. I cannot see these stocks being lower a year from now, never mind 2.
These positions are the beginning of me getting back into long term positions. I think it’s a nice slow start with real good stocks. If the stocks are lower next week I’ll be buying more contracts of each LEAPS. If one of the stock get a good pop and the market is still very volatile I might take profit with the hope of getting back in when the stock rolls back down.
LEAPS are a great strategy for people who don’t have time to watch the market every day. The thing that makes LEAPS so good is they are cheap. Take a look at my NVDA LEAPS. I’m controlling 100 shares of a $249 stock for $6200. If I wanted to buy 100 shares of the stock it would cost me $24,900.
If you have any questions on this strategy please send me an email.
Successful Trading,
Steve
The Options Coach