Goal $1.4 Million: Step 1 of 4 - Getting Started
Goal $1.4 Million: Step 1 of 4 - Getting Started
The first of a four-part series about how I trade growth stocks and sell options.
This service is for general informational and educational purposes only and is not intended to constitute legal, tax, accounting or investment advice. These are my opinions and observations only. I am not a financial advisor.
I have not inherited any wealth. My account started at zero and every dollar I put into it I have earned. But my kids, they are going to inherit millions.
I know this because I’m dedicated to making it happen and I take action every day, bringing me one step closer with every trade.
Maybe you are the first person in your family to invest. You might not know anyone else that trades stocks. You might not have any idea on what direction to take.
But you are here. And you are reading this because you want to achieve more. For that, you should be commended and rewarded. And with enough dedication, I believe you will be.
I thought this would be a good time to walk through how you can get started building an account to $1.4 million and every step needed to cross the finish line.
I do not spend dozens of hours every week studying the stock market. Every day I spend an hour or two at the most on my trading, including study/prep time.
You can keep it simple and effective and over the next four weeks I will show you how.
And of course, I have a full recap of last week’s action and a look ahead to the final week of trading in March.
Where do I start and how much money do I need?
The biggest mistake made by traders is rushing into the first strategy they find without considering if it is the right strategy.
The right strategy is one that fits your personality and allows you to be effective within the constraints of your lifestyle.
If you have been losing money consistently there is a good chance you are not using a strategy that aligns with your personality and lifestyle.
If you are working a full time job it is unlikely you are able to stare at a screen all day day trading.
Trying to take shortcuts by using alerts from others or relying entirely on someone else to do the work will only help you go broke.
For me, the right strategy is to buy growth stocks and hedge risk by selling covered calls. We will talk in more detail about the overall approach a little later.
For those that are not famiilar with the strategy, selling covered calls means you are selling call options, collecting cash for them, and holding the shares needed to support the option you sold.
I like this strategy because it hedges risk, is focused on collecting cash, and can be utilized to beat stock market returns. I also enjoy it’s simplicity.
This strategy I plainly refer to as the Covered Call Strategy and more creatively refer to as “Calls on Growth”.
To implement the strategy you need to be able to buy 100 shares of at least one stock. You will always be accumulating full lots, meaning positions of 100 shares. This is the minimum number of shares needed to sell a covered call.
The beauty of this stratgy is there are stocks of all sizes that can be utilized.
For example, you can start with around $500 and buy the 100 shares of SOFI needed to sell covered calls. Or you can start with $5,000 and buy 100 shares each of DKNG, VALE, NIO and RKT to sell covered calls against.
I share my small account on Savvy Trader so you can see exactly this type of small account trading in real time. You can follow it for free here: Covered Call Portfolio
The size of your account does not matter because there are stocks for all sizes. The important thing to do is get started accumulating 100 shares of a position.
How much time does trading take?
This is another part of the process that you can control. The key thing to do here is understand when and how much time you can dedicate to trading.
Once you figure this out, set a schedule and test it out for a month.
There are various strategies and each one requires a different schedule and time commitment. It is critical that you outline how much time you can spend.
I chose the covered call strategy because I enjoy trading options as well as investing in growth stocks but I do not want to spend all day trading.
In contrast, day trading by the minute or the hour requires an immense amount of time. I thoroughly enjoy it but I do not want to spend all day trading every day. I have too much to do!
And here’s a look at the set up I use when I day trade, it is much more complicated than the single chart I use for the Covered Call Strategy.
It is no doubt an adrenaline rush, a lot of fun, and can be very profitable. But the Covered Call Strategy is also profitable, and I can execute it in a fraction of the time.
Time spent on preparation and then on trading itself is not something that is discussed enough.
Your life should not revolve around your trading unless you are doing it full time. And even then, find some balance.
The best way that I have found to maximize my trading ability and remain consistent over long periods is to figure out a schedule and stick to it.
If you work Monday through Friday, you might need to schedule trading preparation in the evening and trading execution before work or during lunch.
If you are a stay at home parent, your trading schedule could look different every week.
The point is, your schedule is an important consideration. Do not overlook this.
I encourage you to try different styles of trading or at least discuss them with other traders to see what might be best for you.
If you would like to connect with me, send me a DM on Twitter. I always enjoy talking trading!
You can follow me under the handle @tradernatehere. I am meeting great people there every day and making new trading friends.
Keeping the focus on trading growth stocks and selling covered calls, I spend five to seven hours each week in total. That is prep time and trading time.
I am still very active, trading nearly every day. And it takes less than an hour of preparation each day.
It always takes longer at first. Finding a good rhythm and settling in on a routine takes some time.
Give yourself room to make adjustments and test out strategies until you find the one that works best for you.
My trading schedule typically looks like the following:
Saturday: 1 hour to review last week’s trades & start looking at the upcoming week’s opportunities
Sunday: 1 hour chart review & prep on my own, 1 hour chart review with friends
Monday-Friday: 30 minutes prior to market open, identify & confirm potential trades for the day
Monday-Friday: 15-30 minutes executing trades usually shortly after the open, or during the last hour of trading
There are variations to my plans that impact this schedule, but for the most part I am able to stick to it and I trade better when I do.
Gather Your Watchlists - Sort by Sector
There are many ways to pull together a watchlist or multiple watchlists. My favorite is to ask my friends.
Another approach is to simply search “top 20 ______ stocks” and fill in the blank for each sector one by one.
You will get different results from your searches and I recommend that you include all of the names that interest you at first as well as those that might not.
You are building a stack of stocks to review and over time you will add and subtract names from you list. At the start, you want to collect as many names as possible without going overboard.
I like to have between 10-20 stocks per sector to review. In some I have much more.
Here’s a look at my sector watchlists. Borrow whatever you’d like!
Your watchlists will change over time, that is expected.
Sorting by sector allows you to compare charts and remove the poor performers in each industry while focusing on charts that look constructive.
I also recommend reviewing every chart, every week. For many of the charts it will be a quick glance and you move on. But not always.
You will be surprised by how much a chart can change in just one week. Consistently reviewing the data is how you find opportunities week after week.
Step 1 Wrap Up
This is just the start of a series of posts built to set you up for trading the Covered Call Strategy with growth stocks. My favorite strategy.
We are just getting going and next week I dive into how I select growth stocks for the portfolio.
I will cover how to review your watchlists, how to read charts, and understanding when to buy and sell your shares.
You won’t want to miss out!
Trading Recap and Next Week’s Trades
Last week our positions and MRVL and NIO both moved higher, +2.74% and +9.81% respectively while the markets did not fair nearly as well with the S&P 500 up +1.39% after rebounding Friday.
The shares of NIO are being called away which will free up capital to buy the next growth stock.
Since February, when I opened the position in NIO the stock has declined. The beauty of the covered call strategy is I was able to offset those declines by selling calls nine times.
Instead of taking a loss of 22% I was able to offset the loss with the cash collected from selling calls. This is a huge benefit of the strategy.
Despite the poor performance, incredibly volatile markets, and having my shares called away I am pleased with the number of calls I was able to sell to offset losses.
The trade was a losing one, but I reduced the losses by more than half and was down 9.5% instead of the full 22% because of the calls I sold. The power of options.
The trades in MRVL are going well as mentioned.
The call I sold was the $43 strike expriring 3/31 and I collected $54, or a little over 1% of the purchase price for the 100 shares of MRVL I bought.
The covered call strategy allows you to build in a risk buffer from the start and getting 1% for a little under two weeks is an excellent return.
Next week I am looking for MRVL to dance back up to $43 while the call expires and I roll out another week, selling another call and collecting more cash.
The cash I have on hand plus what I received for the sale of NIO also needs to be put to work. I like the way the weekly chart for Luminar Technologies (LAZR) is setting up.
The shares for LAZR closed Friday at $6.39 but recently has moved from $4 to over $10 and back down to hold above $6. If it can hold, I like the possibility of a big bounce.
It recently broke trend on big volume, a combination I am always looking for.
MACD is also trying to go positive which would be bullish.
If I buy shares, the selection of which call to sell will be tricky. This stock moves big and fast.
If we see signs of a positive market overall I may not sell a call at first and instead take some risk and wait to see what happens.
That being said, I’m targeting the $8 strike expiring April 6th which was selling for $10 at Friday’s close. This is roughly 1.5% collected right up front.
If I make this trade including selling the call, and the shares spike beyond the strike price I will be forced to sell at $8 which would be a gian of 25% plus the 1.5% cash collected up front. Not bad!
What I expect is this turns into a stock only trade if I can get in between $6.00-$6.20 and will target taking profits at $6.80, $7.40, and $8.30.
Here’s the daily chart for a closer look at those levels.
I like the higher highs and higher lows taking shape and if $6 holds I can see a run towards a new recent high taking shape.
That’s the trade I’m watching the closest this week!
Twitter Spaces - Chart Reviews, Trading Strategies
Quick Reminder and thank you to everyone that tunes in!
Every weekend I am hosting a Twitter Space with Shaun Clarke - @ShaunClarke_ and Kaye @InvestKaye reviewing dozens of charts and talking strategies for the upcoming week.
It is a great way to sharpen your chart analyzing skills while hearing about what we are each looking at for the upcoming week.
Link to this week’s Twitter Space: Sunday Trading Prep
I hope you find this information useful each and every week.
If you have any questions, be sure to find me on Twitter @tradernatehere and send me a DM! I am always up for talking trading.
Also, be sure to follow for daily posts on trade updates and trading strategies as I pursue my goal of educating thousands on the many ways trading options can help build your account.
Have a great week of trading ahead!
-Nate