Don’t Get Sucked into a Bear Trap

If you're new to the New Money Club or have any questions about how to allocate positions or how to execute  trades, watch this video first.

Dear New Money Crew,

Happy Friday, and welcome to your weekly update!

The big news is that Big Tech crushed earnings expectations across the board. Apple is the stock of the day after a blowout quarter, and looks to be going higher in the coming days.

They announced their plan for a 4-for-1 split, which is great news! Because for each share of Apple stock that an investor owns, they’ll receive three more shares. This means the shares and options contracts of Apple will be more affordable for investors.

Despite the excitement about Apple, the broad markets have been a tire stuck in the mud. Investors are a bit cautious going into the weekend after jobless claims ticked up for the second week in a row.

And Congress doesn’t look to be any closer to passing another stimulus package. That could be a headline that’s going to create more of this stop and go action in the market.

The fear gauge for the S&P 500, known as the CBOE Market Volatility Index (VIX), is holding at 25. That means we’re still 2x the average level of volatility, so we’ll continue to see markets whip around.

Unfortunately, this sideways action has us sitting on our hands waiting to take our next profit. We'll get back to our winning ways. We just need to stick to the system. Patience and persistence are essential to keeping us on track.

Portfolio Update:

We’re sitting tight and letting this play out. We’re nimble and can take advantage of any market environment.

Right now, our open positions are sitting in the red. But don’t let that trick you. Oftentimes we'll enter a new trade only to watch it decline double-digit shortly thereafter.

But don’t let that discourage you. It’s just how the instrument works. As you’ve seen from our previous trades, options move fast. Therefore, we like to use them to book big weekly gains - that’s the power of options!

And remember, even if an option declines in value right after you buy it, these are only paper losses until you close your position. Our limited risk options allow us to trade profit opportunities with greater flexibility — and much higher potential gains than buying stocks outright.

On Monday:

  • Buy-To-Open iQIYI Inc. (NasdaqGS:IQ) Aug. 28, 2020, $22 call (IQ200828C00022000) up to $0.98 per contract or better, for the day.

Right now, our open positions are:

  • Nordic American Tankers (NYSE:NAT) Oct. 16, 2020, $5 call (NAT201016C00005000).
  • China Mobile LTD (NYSE: CHL) Aug. 21, 2020, $40 call (CHL200821C00040000).
  • Box Inc. (NYSE: BOX) Aug. 21, 2020, $20 call (BOX200821C00020000).
  • iQIYI INC ADR (NasdaqGS:IQ) Aug. 28, 2020, $22 call (IQ200828C00022000).

Now we wait and let the market come to us. And I’ll be keeping you updated every step of the way.

I’m looking forward to answering your most pressing questions this Wednesday. If you want yours answered, email it to questions@newmoneycrew.com.

Have a great weekend and I’ll have a new trade for you on Monday.

As always, you can track our portfolio here.

To your wealth, freedom and options!

Joshua Belanger
New Money Club