Wednesday, August 28, 2024

♟ From LEAPs Strategies to Preferred Stock Picks

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"In volatile markets, the right strategy can turn uncertainty into opportunity."

Karim Rahemtulla, Head Fundamental Tactician, Monument Traders Alliance

Karim Rahemtulla

It's another big week in the markets, and I know you're all looking for an edge. With tech heavy-hitters CrowdStrike and NVIDIA just releasing earnings, followed by crucial economic data releases on Thursday - including GDP and jobless claims - there's a lot to keep an eye on.

That's why I wanted to share some key insights from our recent Catalyst Cashouts Q&A session.

You guys asked some fantastic questions, and I've picked three topics that I think are particularly relevant to the current market landscape.

Whether you're eyeing those big tech earnings plays, thinking about longer-term strategies with LEAPs, or looking for steady income in a rate cutting environment, I've got you covered.

So, let's dive in and get you armed with the knowledge you need to make some savvy moves this week.

Here are the three burning questions you all wanted answered:

What's a fair price on leaps?

This is a great question about long-term equity anticipation products (LEAPs). Here's my formula:

For options expiring in one year: Pay up to 10% of the underlying price

For options expiring in two years or more: Pay between 10-15% of the underlying price

For example, if a stock is trading at $40, I'd pay up to $6 for a two-year LEAP.

But here's the key: You want the strike price to be as close to the current stock price as possible.

The more time an option has, the more extrinsic value it has. That's why buying in-the-money options is often the way to go. Yes, you will be paying a higher premium, but they will have less time value because they'll have more intrinsic value.

By buying in-the-money options on LEAPS you are actually paying less in extrinsic value, and significantly less than buying the stock outright.

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What's your approach to put selling in this market?

Put selling can be a great strategy for generating income, especially in this extended market. Here's my approach:

  • Look for puts that would put you in the stock 20% to 50% below the current price. This gives you a significant margin of safety.
  • Use a probability calculator. You want there to be an 80% probability of not being assigned the stock. This helps manage your risk effectively.
  • Consider the stock's fundamentals. Only sell puts on stocks you wouldn't mind owning if assigned.
  • Be aware of upcoming catalysts like earnings reports that could cause significant price movements.

Remember, it's not just about collecting premium - you need to be prepared for the possibility of owning the stock at the strike price.

We've had a lot of success with this strategy. In fact, In The War Room, we've had a 95% success rate with our put selling strategy since 2019.

And in 2024, we've gone 25-for-25 on our put selling strategy for a 100% win rate!

That's the power of combining probability with smart stock selection.

Are preferred stocks still a good play with potential rate cuts?

Absolutely!

Our preferred stock picks, particularly Wells Fargo and Bank of America, are doing exactly what they're supposed to do.

The Fed just announced they're planning to lower rates, which is great news for these stocks.

Both Wells Fargo and Bank of America preferred stocks are paying dividends soon.

In fact, they go ex-dividend in about 3-4 days.

If you want to capture this dividend, now might be a good time to get in.

Just remember, even though the Fed is planning to lower rates, it won't happen overnight.

Expect incremental decreases, likely in 25 basis point steps.

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YOUR ACTION PLAN

We're constantly analyzing the market and identifying potential opportunities, whether it's earnings plays like NVIDIA, income strategies like put selling, or steady performers like preferred stocks.

In Catalyst Cashouts Live, we break down exactly what we're seeing in the market, why we're making certain moves, and how you can position yourself to potentially profit. We've helped our members navigate some tricky markets, and we're not stopping now.

If you're not already a member, it's time to get off the sidelines.

Join Catalyst Cashouts Live and get access to:

  • Weekly live Q&A sessions where we break down the market and answer your burning questions
  • Real-time trade alerts on opportunities like the upcoming NVIDIA earnings
  • Our full portfolio of current positions, including our successful preferred stock picks
  • Expert guidance on advanced strategies like LEAPs and put selling
  • A community of like-minded traders ready to tackle this volatile market

Don't let another opportunity pass you by.

Whether it's capturing dividends from preferred stocks, playing big tech earnings, or using options strategies to generate income, Catalyst Cashouts Live gives you the tools and knowledge you need to navigate today's market.

Plus, I've just revealed my top gold stock pick – a company I believe is poised to outperform the market. This is the kind of actionable intelligence you get access to as a Catalyst Cashouts Live member.

Join now and be ready for the next big market move!


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