Opportunities to Sell Options for Piles of Cash
Plus, a look at last week's CCL trade and ideas for trading at the start of August.
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.
There is a time to let winners run and a time to build up your cash position. And the best scenarios are those times when you get to do both!
We are firmly in one of those scenarios.
The bulls keep pushing stocks higher while the bears insist that markets are overbought and need a correction.
I think they’re both right, but neither will get exactly what they want.
Instead of one extreme or the other, a breakout higher or crash lower, I like the pattern that has started to play out in a few stocks already.
Consolidation.
Stocks don’t need to drop dramatically to cool off. Instead, they can enter a period of sideways price action which allows for range trading.
Instead of crashing back down to the moving averages, stocks can trade sideways and allow the averages to slowly catch up to the current price levels.
This is when big money can be made trading growth stocks and selling options against these positions.
This is the trading strategy I have been using to beat the market and this year it has really been on fire with the portfolio up 54.89% as of the time I’m writing this.
I offer transparency into my trades through Savvy Trader, you can subscribe free here if you haven’t already signed up. It’s a great place to find trading ideas!
And a huge thank you to those that have already subscribed. It looks like I am going to win the July Social Star contest for adding over 325 new subscribers and counting!
While I was leading for nearly half of the month in their Top Performer contest, I slipped a couple of spots. I am still very happy with a return of 18.91% over the past month.
I will be signing up again for the August contest and might have to add some new names to the portfolio. Semiconductors look really interesting here!
I have also started building a course to teach you this style of trading so you can construct your own portfolio and create your own trading ideas. You can do this!
The course will be for those that are serious about building their accounts quickly and with a disciplined approach. It is coming along nicely, and I’m excited about it.
Stay tuned for that! Meanwhile, let’s keep the trading education rolling here and get to a few trades after this quick announcement.
Wolf’s Spaces Every Tues/Thurs 1pm ET
I will be on Wolf Financial’s Twitter Spaces (I guess it’s X Spaces?) as a regular speaker every Tuesday and Thursday at 1pm ET.
I am excited about this!
You will hear me talking about positions in my Savvy Trader portfolio as well as engaging in some tech talk as it relates to trading.
Wolf is the #1 Spaces host for investors, it says so in his Twitter banner! But seriously, the relentless work he puts in and the 40+ hours of Spaces provided every week is top notch and really does put him at the top of the list.
I hope you get a chance to tune in. It is going to be a lot of fun every week!
Trade of the Week
I will start highlighting trades that either worked very well or did not come through and will provide some insight behind the trade idea.
This week there were a few solid wins, but the favorite goes to CCL calls that doubled in a single day. Great trade!
I suggested the $17 strike calls expiring Aug 4th if support held. Which it did and the call options went on to 100% gains the next day.
The shares continued to move higher to close out the week on Friday but did not regain the prior day’s high and then sold back more than half of the day’s gains.
I like to use these spots as a reminder to take profits. I will say it over and over. You cannot go broke taking profits.
If you took profits but held on to a few contracts in the hopes that they run I have some potentially good news. The 20-day SMA held on Friday. It might be the support CCL needs for another move higher.
While I do enjoy a solid optoins trade to the upside, that is not my bread and butter.
I prefer finding growth stocks that are consolidating in a range and trading shares in that range while selling covered calls along the way.
This is the Trader Nate Trading (TNT) strategy that I share with all Patrons via the TNT Discord Community. Be sure to check it out for all of my trade ideas and more!
And like I mentioned, we are seeing those setups pop up left and right.
Last week I noticed a few new opportunities opening up so I thought this would be a good time to highlight a covered call trade idea or two.
If you want a broader look at all of my trade ideas, be sure to join Trader Nate Trading and get access to not only every trading note I’ve got, but a great community of traders!
Now let’s get to a couple of those trade ideas.
Trading MRVL and Selling Calls for Cash
MRVL is in a well-defined range and while shares are hanging around the top half of the channel with support from the 20-day SMA, they’re struggling to get above $65.75 with any strength.
What does all of this mean?
First, the top of the channel is clear at $65.75 and can be used for identifying when to sell covered calls. If you already own 100 shares of MRVL I like considering selling covered calls after shares reject at or near this upper band.
Specifically, the $66 strike calls expiring August 11th can bring in 1-2% in short order.
You can wait for a slight pull back to feel a bit better about the likelihood of a further draw down but really the key is for the 20-day SMA to be broken, allowing shares to retrace to the bottom of the channel.
If shares do pull back towards $58.33 you would get the opportunity to close out the trade and wait for the next rejection at $65.75.
This is actually a very important note. You want to wait for the rejection at the resistance level before selling covered calls.
Growth stocks tend to make big moves, including a big move right through resistance. If shares make a strong move through the upper band of the channel, you do not want to be selling covered calls.
This strategy allows for collecting big piles of cash because of the large premiums on the options being sold. But the magic happens when shares are allowed to run higher, capturing big gains along the way.
The key is to close out options contracts at the bottom of the channel and wait for the rejection at the top of the channel before selling more covered calls.
To summarize, Trader Nate Trading is about:
Picking the right growth stocks
Identifying the trading range
Buying shares at the lows
Collecting big premiums selling calls at the highs
Recognizing when to let the shares run
This is also a trading strategy you can utilize without needing to stare at a screen all day.
The levels for taking profits and setting a stop loss are identified and with a few alerts set, you can easily and confidently set up your exits for trading success!
DKNG With More Opportunities
I will be reviewing DKNG in more detail on The Trading Triangle, which I host every Sunday streaming live on YouTube. We review a handful of tickers and give our thoughts on the week ahead.
We just got the live stream going and are hoping to grow it quickly! Subscribe and like and do all the things, I appreciate it!
Back to DKNG, here’s the chart I posted for the TNT community and will be reviewing on the livestream.
Last week the candles started to break out to close the week and the TNT traders that were accumulating shares in the recent range are starting to see some gains.
If you didn’t get in, watch for an opportunity between $31-$32 if we get a quick retest of prior resistance level $31.60 before trying for a move up to $35.
If shares fall completely back into range, first wait for support at $30.50 before getting in would be my approach.
If shares make the push to $35 and reject, look for a great opportunity to sell covered calls at this price level for large premiums.
TNT is Exploding! Pun Intended
Thank you all for supporting Trader Nate Trading, I could not do any of this without you! I am ramping up and things are going to only get better from here.
If you can believe that!
Here’s a rundown of everything going on and a few items on the way!
Join the TNT Community!
Follow me on Twitter (X, whatever!): @tradernatehere
Catch me on Wolf’s Spaces every Tues/Thurs at 1pm ET
Host of The Trading Triangle on YouTube!
Track the Covered Call Portfolio on Savvy Trader
Keep an eye out for the TNT Trading Course!
Let me know what you are interested in learning about and I will make a future newsletter the focus of one of the top suggestions from all of you.
Have another great week of trading!
-Nate