{"id":6705,"date":"2019-12-16T13:18:47","date_gmt":"2019-12-16T18:18:47","guid":{"rendered":"http:\/\/www.mainstbeatswallst.com\/?p=6705"},"modified":"2020-07-15T23:48:09","modified_gmt":"2020-07-16T03:48:09","slug":"walmart-diagonal-spread","status":"publish","type":"post","link":"https:\/\/www.mainstbeatswallst.com\/?p=6705","title":{"rendered":"Walmart Diagonal Spread"},"content":{"rendered":"

Diagonal Spreads will be a major part of my Wealth Builder. More specifically my Stock Alternative Portfolio<\/strong>.<\/p>\n

Diagonal Spreads will be a very important strategy I\u2019ll use with my Stock Alternative Portfolio<\/strong> positions.<\/p>\n

If you haven\u2019t already read my Wealth Builder section, please do so. There are 7 pages ending with the Wealth Builder Portfolio page. On this page you will find 3 portfolios: 5 Star Trading Portfolio, Pillar of Strength Portfolio and the Stock Alternative Portfolio. The Stock Alternative Portfolio will hold LEAPS options. At the present time there are 2 LEAPS positions in the portfolio. A LEAPS with Walmart, and one with Marvel.<\/p>\n

The Walmart (WMT) LEAPS I bought on 12\/2\/19. It\u2019s a $120 Strike Price option to expire on 1\/21\/22.<\/p>\n

To review, a Diagonal Call Spread is selling a Short option against a Long option. The Long option must have an Expiration Date further out than the Short option you sell. Also, the Long option must have a Strike price lower than the Short option. Take a look at the 2 options below. The Long Call has a Strike Price of $120 and the Short Call has a Strike of $125. This means if I get assigned on my $125 Short Call I have the right to buy the shares at $120. Also notice my Long Call does not expire until Jan of 2022 and the Short Call expires in about a month. The Short Call is the one I sold today for a $250 premium.<\/p>\n

The Diagonal Call Spread I also call a Stock Alternative Covered Call<\/strong>. I\u2019m covering the Short Call with an option and not the stock.<\/p>\n

Walmart Long Call Option<\/p>\n

12\/2\/19 \u2013 Buy to Open 10 WMT 1\/21\/22 $120.00 C @ $13.50 ($13,500)<\/strong><\/p>\n

Walmart Short Call Option<\/p>\n

12\/16\/19 \u2013 Sell to Open 10 WMT 1\/10\/20 $125.00 C @ 25\u00a2 (+$250)<\/strong><\/p>\n

Why did I make this trade? This trade gives me a 25\u00a2 premium, not so much for a 1 month trade! So Why do I like this trade so much?<\/p>\n

I bought the Long Call on 12\/2 because I feel WMT is going higher. I\u2019m in this position as a stock alternative. To buy 1000 shares of WMT at 120 it would cost me $120,000. I bought the 10 contract Call, controlling 1000 shares of the stock, for $13,500. A little bit less of an investment.<\/p>\n

While holding this WMT LEAPS I can sell Diagonal Spreads to bring in premiums, making \u00a0Stock Alternative Covered Call. I\u2019m in these Diagonal Spreads for the premium only, not to get assigned. This is why I went out on the Strike Price to $125. With the stock at $120 I don\u2019t feel the stock will move to $125 in the month. I went out enough to where I won\u2019t get assigned, but I still get a nice premium. This is not my normal premium of \u201c1 Week\/1%\u201d \u00a0but I\u2019m bringing in money while I own the LEAPS. I look at this as a dividend. I paid $13,500 for the LEAPS. I brought in a premium of $250. This is a 1.85% Rate of Return<\/a><\/span> for a 26 day option. If I hold this WMT LEAPS for a year, and sell an option once a month, my Rate of Return will be 22% on the year.<\/p>\n

I do not think WMT will hit $125 in 26 days, but anything can happen. If it does, I deliver the stock and start again.<\/p>\n

This Stock Alternative Covered Call get a Risk Factor 1<\/strong>. There will not be much risk.<\/p>\n

This will be a great way to bring in money while holding LEAPS positions in my Stock Alternative Portfolio<\/strong>.<\/p>\n

If you have any questions on this strategy please send me an email. This will be a great strategy for someone who doesn\u2019t have the time to trade every day.<\/p>\n

This strategy also has a huge benefit if you work on margin. When owning a LEAPS you can sell Calls and it will not lower your margin by much. If I didn\u2019t own this LEAPS on WMT my margin would have been lowered by $120,000, the price of the stock. Owning the \u201cRight\u201d to buy the stock is looked at the same as owning the stock.<\/p>\n

Successful trading,<\/p>\n

Steve<\/p>\n

The Options Coach\u00a0<\/em><\/p>\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

Diagonal Spreads will be a major part of my Wealth Builder. More specifically my Stock Alternative Portfolio. Diagonal Spreads will be a very important strategy I\u2019ll use with my Stock Alternative Portfolio positions. If you haven\u2019t already read my Wealth Builder section, please do so. There are 7 pages ending with the Wealth Builder Portfolio […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[1],"tags":[],"class_list":["post-6705","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p75MP0-1K9","jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/posts\/6705","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6705"}],"version-history":[{"count":2,"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/posts\/6705\/revisions"}],"predecessor-version":[{"id":8138,"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=\/wp\/v2\/posts\/6705\/revisions\/8138"}],"wp:attachment":[{"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6705"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6705"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.mainstbeatswallst.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6705"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}