Telegram Trading

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Assessment: The week ahead brings a bunch of big tech earnings. This has been a market that hasn’t been going anywhere fast. I did a breakdown last week that showed how whether you bought CALLS or PUTS in recent weeks you lost money. It’s all about time decay in this market. Perhaps the tech earnings this week will be the catalyst we need to get this market moving!

As many of you recall, I took a position in DraftKings last year, one I planned to hold long-term, but one I did not expect to turn so hard in the weeks that followed. Well, DraftKings has rebounded nicely and provided several great opportunities to dollar cost average down (you own 100 shares at $28 and buy another 100 shares at $15…your average stock price is now $21.50). I have also sold covered calls against my position throughout the year to lower my entry cost. What is that? Let’s say you hold 100 shares of DKNG stock with the price at $15. You sell CALLS against your position with a strike price of $20. If those calls go for $0.50, then that’s $0.50 per share that comes off your stock acquisition cost. IF the price is above $20 at expiration, you have to sell your shares for $20. If it remains below $20, you keep the $0.50 per share. At which point the $21.50 in the example above becomes $21 as the average stock price. Do it again and it goes to $20.50 and so on. At the present, the DKNG position is at $21.97, but thanks to the various tactics over the past year, it is back in the green for me. I plan to hold for the long-term (i.e. 2-3 years), but nice to see the rebound.

Could be a wild week…let’s hope because this market has been as dull as any I can remember over the last 10 years.

Good luck in your trades!