 Hey, good morning, everybody. Lee Lowell here, smartoptionseller.com. Hi, I'm down here in a little window down here. How's everyone doing today? Today's October 10, 2020, Saturday. Hey, listen, if you have an interest in selling covered call options, stick around because that's what we're gonna be talking about today, free options information. If you have at least 100 shares of stock in your account and you're not doing anything with them, then you may be leaving money on the table. I'm going to show you how you could be generating some current income just from the mere fact that you have shares of stock in your account. So stick around for that. So what are we doing today? Well, we have our Saturday synopsis where we look at the chart, see what happened over the last week's worth of trading and take a look forward to see what may happen in the week coming up. So let's dive right in. We take a look at the SPY exchange traded fund. Exchange traded fund for the S&P 500, extremely liquid. It's a good barometer of the overall market. So SPY had a huge breakout this week, had a nice up move this week. At the end of last week we were talking, it was just sitting on the 50 day moving average line right here. I always talk about the moving averages on my charts. I've got the blue 20 day, the red 50 day and this orange 200 day moving average. It could be green line, I'm not really sure. Anyway, so we always talk about how we want to see the patterns of the stock or the market itself. These are the one day is one day's worth of trading. These bars right here, each bar is one day's worth of trading. So we always like to see a bounce off the 50 day or the 20 day moving average if we're bullish. If you're bearish, of course, you want to see the market going down. We're talking about bullish because we are put option sellers here at the smart option seller. So we like bullish strategies. So the market had been sitting right on the 50 day moving average to end last week. And I had mentioned that if all things were going well with President Trump, because he was diagnosed with the coronavirus. So it turns out he was feeling pretty good this week. So the market was going to take off on that good information. And that's exactly what it did this week, bounced nicely off the 50 day moving average and had a great week ended on highs for the week, getting pretty close to moving back up to these all time highs. So path of lease resistance once again is higher at this point. The SAP 500 has made a nice comeback from this down move it had just powered back higher. So we had this sell off, which was getting the fraught taken out of the market, people taking some profits and the market just wants to keep going higher. There's really nothing from holding it back at this point. We know all the central banks around the world are willing to step in. The US government is trying to pass another stimulus package to help out individuals and businesses. So things are looking good. There's support now under the market. The 50 day moving average is going to act as support now. So looking strong, looking very good. Let's take a look at the NASDAQ. See how that did as well. Also, same thing, had a nice move up this week, bounced right off the 50 day moving average, looking strong ended on the highs of the day, on the highs of the day, this one day bar right here, a little dash on the right side of the bars where the market closed. Very important to see where the market closed. So we closed right on the highs, looking to take out the all-time highs. So that's going to be a little bit more effort, maybe over the next couple of weeks, I can see us taking out the all-time highs. Let's look at the Dow Jones industrial average. Same thing, had a great week, looking good. All the indexes had the same kind of pattern where it was bouncing right off the 50 day moving average, had gone down, moved back up above both 20 day and 50 day, and now we've got great support at the 50 day looking strong. I like how this market's looking for next week. The only way I can see this going down is some major catastrophe, which I don't see coming. So I'm looking at the market to remain strong, to keep going up, and the Dow can probably take out this high here. Still has a little ways to go before the all-time highs that we saw back here, but the market looks good. I'm really enthusiastic about being long here. So things look good for the market. Let's take a look at some individual stocks, making note this week. One that we always look at, of course, is Apple. Everybody's favorite Apple. I had mentioned last week that Apple, two weeks ago, had closed above the 50 day moving average, and that as long as it could stay above that, it could help pull the market up. So you can see the 50 day moving average line is right here. And Apple, all this past week was just hugging the 50 day moving average line. And then yesterday, Friday, October 9th, finished on the highs of the day above the 50 day moving average. This is a nice uptrending pattern here. The moving averages are uptrending. The 20 days starting, trying to curl back up again. See this little curl right here. I could only see Apple starting to move back up higher. Now we had this massive blast off higher with Apple. Here was the earnings they had, their last earnings, and they announced the stocks, but so there's all this enthusiasm, just pulled it up higher, and then all the air got let out of it. So we had the down move profit taking. Now it's getting its mojo back. You know, it's finding its support right here on the 50 day moving average. At this point, I think all the people that needed to sell have gotten out of the market and now the longs could come back in. So I could only see Apple starting to get back higher here. It's consolidating, having this nice little consolidation pattern. Once it starts to break out, the momentum's gonna take it in the same, in that same direction where it breaks out. So, you know, I can actually even draw little, some lines here. So a little bit of a triangle pattern here. Market looking to get at bust out of it. Let me make this a little bit larger so everyone could see what I'm looking at. I wanna show you some of these patterns that I see on the charts so you can see exactly what I'm looking at and thinking. Okay, so we have this little triangle pattern here, okay? And once it starts to break out and it will most likely continue in the same direction. So at this point, I can only see Apple starting to move back to take out all-time highs, just under $140 a share. So this is a good consolidation pattern. Gave people a lot of time to realize, okay, do I wanna get long or do I wanna stay out? And I'm thinking, it's time to get long. That's what I see with Apple. What else do we have? So we wanna look at, I wanna show you some other price patterns that I've been seeing. Intel Corp. Now we know Intel Corp had their last earnings, dropped it down major from $60 a share all the way down to the high 40s. AMD, which we'll look at in a second has been stealing a lot of Intel's thunder over the last couple years. AMD has really come on strong as part of a, as the king in the semiconductor chip market, chips that they put in computers. AMD's really taken over some good market share from Intel. But as far as price patterns go, we see this W pattern that Intel has been making over the last two months or so. This could be a very powerful bullish pattern as long as Intel gets above the resistance line, which is really the middle of the W. And just Thursday and Friday this week, it popped out above the resistance line. Yesterday, Friday closed just above it, had made some new highs here on this bar, but closed back down near the lows. So I'm thinking if Intel can remain on an upward trajectory next week, this thing's gonna go and it's probably going to want to go back up to the $60 level where we had this big gap here. Gap is when the stock closes one day and then opens up the next day well away from it. So we have what's called this gap right here. And markets like to refill the gaps sometime in the future. So if Intel could find its footing, it's gonna go and it's gonna fill in this gap here by moving all the way back up to 60. So keep an eye on Intel. I think we've got a bullish break out there. What else do we have? Let's look at Oracle's another price pattern that I saw on the charts. It's making this bullish flag pattern. What happens here is that the ranges start to get tighter and tighter so it's storing up all this energy for a move higher or lower out of the triangle. And just this past week, here we go, Oracle, moving out bullishly out of the pattern so I can only see Oracle continuing to move higher over the foreseeable future. So keep an eye on Oracle. Couple others, Procter and Gamble. It's another stock that I like. It's also making a bullish move. We've got this, had some resistance here, has this uptrending movement. And as soon as it gets through the resistance, it's on its way. Well, yesterday, Friday, October 9th, blasted out of the pattern here. And as long as it could keep a couple of days worth of trading above this resistance line, then all I can see is more upward movement for Procter and Gamble. And you'll see the same pattern in Lowe's. This is the home department, the home goods store Lowe's. People go buy everything they need to fix up their homes, build homes, all that good stuff. Lowe's making the same patterns we just saw on Procter and Gamble having this nice uptrend. It's got the resistance line here, broke out nicely yesterday, Friday. Next couple of days, we'll be telling, as long as it can stay above the resistance line, Lowe's is gonna keep going. Nice bullish pattern for Lowe's. So what else do we see? Let's go back to some of the biggies. Let's take a look at Amazon because Amazon had been well below its 50 day moving average and it turned around recently. We had this downtrend channel off the highs and now we've got this uptrending channel convincingly moved above the 50 day moving average yesterday, October 9th, closed right on the highs. Amazon was up another $100 a share yesterday. So good things to back above all the moving averages, 200 days sloping up, 50 day sloping up, 20 day trying to curl. So this is, Amazon's looking strong here. We like that. What else we got? We can look at Microsoft, there's another big one. These are the ones that have been pulling the market up. Same thing, Microsoft had been below the 50 day moving average for a while and yesterday, October 9th, convincingly popped above it. I see strong things coming from Microsoft. As long as we don't have any major news events to derail the market, the momentum is going to keep things on the upside. Lastly, let's take a look at Tesla. We've been looking a lot at Tesla lately because it's been such a strong stock. Now let me draw this price pattern that I'm seeing. So you all can see what I'm seeing. It's another triangle pattern that it's storing up all this energy waiting to blast out. And I can see in the next couple days, Tesla's gonna figure out which way it wants to move. So let's draw the pattern here so we can all be on the same page, see what I'm seeing. Here we go, triangle pattern. Once again, bullish triangle pattern because it's coming from the downside. It's moving upwards. So we're just waiting to see which way it's gonna move out of the triangle up or down. My bet is on the upside because everyone loves Tesla bullish stock. So the momentum I'm thinking is going to carry it out of the triangle to the upside. I can see $500 in Tesla sites over the next couple weeks. If not sooner, Tesla could go $100 a share at a clip. So here we go, $500 next stopping point for Tesla in my opinion. So there you go, there is some assessment of what's happening in some stocks and the market in general. Let's go back to the S&P 500 one more time, get some thoughts for next week. Things are looking good. Like I said, powered above 50 day moving average, looking strong, 20 days starting to curl up. That means it's probably gonna wanna start moving higher again, we like moving averages trending upwards. We don't wanna see moving averages sloping downwards. That means a bearish type of market. We concentrate on bullish markets because we are put option sellers and put option credit spread sellers. That means we like bullish markets. S&P 500 looking strong. I can only see this thing going up, trying to challenge it's all time high again. As long as there isn't any major catastrophe news out there in the world that I think the market's momentum keeps going up. So I like the long side here. All right, so that's it for your Saturday synopsis of the market. And so today we're gonna be talking about how to generate some income from the stocks that may be sitting idle in your account. We're going to be talking about selling covered call options. Now you might be asking, what are covered calls? What is that? Lee, tell me about what is that? Covered call options are a way to, if you have at least 100 shares of stock in your account, you can sell what's called a covered call option. That means you're going to sell a call option against those shares that you own. And by doing so, whenever you sell an option, someone pays you money for it. They pay the premium. That's the entry fee for the option buyer. The call option buyer will pay you a fee to potentially take your shares away from you sometime in the future at a much higher price than where you once bought those shares. So if you're, let's just say you bought some stock shares at 100 and now they're at 120. Well, now you can sell a call option with say $130 strike price to somebody else that will give you money today in order for them to take away your shares from you at $130. So that's a price point where you can consider selling out your shares if you want to and someone will pay you money to do that. So let's take a look at our cheat sheet. So we can see what we're talking about. I always have a cheat sheet that's called out. Tips for selling covered call options. Now, once again, you have to have at least 100 shares of stock in your account. So for every 100 shares that you own, you can sell one call option contract. Now, you want to pick a strike price of that call option that meets your potential preferred selling point. So let's say you want to take a profit on your shares at some point and it's smart to always take a profit on your shares because you never know when the market could drop and you don't want to give away all the gains that you've built up. So pick a point where you'd be comfortable selling those shares of stock. Okay, and that's going to coincide with the strike price that you choose. Now, you can also have to look at the expiration dates because every expiration date will offer a different price for those options. The longer the expiration date, the more money you will get, okay? The more time equals more money. So you have to go through the option chains which we'll do in a second and you look to see what these options are trading for. You look to see how much money people are willing to pay you. And you can also check the probabilities of the chance of the stock moving from point A to point B. So you'll know ahead of time what are the chances that you may have to sell your shares to somebody else. So it's always important to check the probabilities and we'll go over that as well. And one of the very most important things is this point right here, point number five, is that you want to make sure that you sell a call option strike that'll take you out at least above where you originally bought into the share. So you want to make sure you're selling above your cost basis, right? So let's just say you bought the shares at 100 and now they've come down to about $80 a share. So you're looking at a paper loss. Well, you don't want to sell the $90 call options because you'll end up selling your shares at 90 and your cost basis at 100. So they'll be locking in a guaranteed loss. You don't want to do that and I'll show you a way to make sure that you don't do that. And lastly, if the stock starts running up higher on you and you're like, oh my God, I don't want to sell my shares anymore, you could always unwind the trade. You can always buy the call option back. So let's take a look at Apple and use Apple as an example here. We've looked at Apple, it closed yesterday, right under $117 a share. So there's a couple of ways you can sell covered calls. So you can actually have shares of stock that you already had in your account for a long period of time that we've had forever, or you can actually go out and buy the shares today and then sell a covered call at the same time. That's called a buy right. You're buying the stock and then you're writing or selling the call option. That's all done at the same time and the same transaction. What I want to talk about today is how you can do it with stocks that you've had in your account for a long period of time that you bought those shares long ago, but you've never sold covered calls before. So I want to show you how you can do that. So let's take a look at our option chain from Interactive Brokers. Interactive Brokers is a broker that I use to trade and get some quotes. So this is an option chain for Apple. We've got call options on the left, put options on the right, and I'm gonna move myself over here a little bit so we can look at the call options. Now let's just say you've purchased shares of Apple at $100 a share recently and you've got a nice, well here at the last trade of the day is $118 a share. This must have been in the aftermarket. So Apple, you bought Apple at $100 a share. You got about $17 or $18 worth of profit locked in and you're thinking, you know what? At some point I think I might want to sell my shares of Apple, but I don't want to sell it at its current price. I want to sell it at a much higher price. So where can I sell some of these covered calls? So let's say you have 100 shares, which means you can sell one call option contract of Apple. And here we have expiration dates for Apple. So let's take a look at the December expiration date. Now this is gonna be entirely up to you which expiration date you choose. You're gonna look to see what the strike prices are paying and you can go through the expiration dates and see how much money you can get. Now let's take a look at December expiration date, 69 days from now. And you potentially want to sell your shares of Apple, let's say for $150 a share. So it's currently at $118. It's got another $32 of upside potential. So you go down to strike price, calm here, here's the $150s. Scroll over to the last bid ask for the day yesterday at October 9th. Went out at $1, three bid at $1, five. So you can probably sell those options for $1, four per contract. You can sell one contract that'll bring in $104 to your account today. Now what you do, if you do sell that, you get $104 immediately, current income, right off the bat. Now what you've done is you obligated yourself to potentially sell your 100 shares of Apple at $150 a share by December, 18, 2020. So what that means is that if Apple goes all the way up to $150 from its current price of $118, you're on the hook to sell your shares for $150. Would that be a bad thing? Well, you bought them at $100 a while ago. Now you get to sell them at $150. That's a $50 move of price appreciation. That's a $5,000 gain for you, not so bad. Plus you get to keep the $104. So you make $5,104. Now, if you want to see what the January options are paying for those contracts, you get another month, now it's 97 days out in time. Look at those same $150 call options. Now you can get roughly, somewhere between $185, $190 per contract. Let's just say you sell it somewhere in between $187, $187 contract, you'll get $187 this time. So now you're still on the hook to potentially sell your shares at $150 until January, but now someone's paid you $187 instead. Now let's just look at one more expiration, the March, 2021. Let's move up 150 strike right here. And all those things are paying a pretty penny, $367 you can get. So you can see the more time you give, the more money you will get. So you have to choose the expiration date. You choose the strike price of your potential sell point and you will be paid for that obligation. So if you bought Apple at 100, you're looking to sell it at 150, don't just sit there with your account waiting for Apple to go up. Sell yourself a call option and someone will pay you money. Now remember, this is not a real recommendation. This is just example only, no real investment advice here. So these are just examples. So you have to decide, okay, where am I willing to potentially sell my shares? And I say potentially because you never know if Apple's gonna move from point A to point B. If Apple never goes up to 150, the trade is over. You get to keep your $367 and guess what? Now you can sell another covered call for another expiration date and collect yourself another $300 or whatever you choose. So as the year goes on, you can continuously sell these covered call options, collecting this money and if the stock never goes from point A to point B, you just keep rolling those covered calls and you just keep collecting this cash over and over again. So now you're making yourself a nice little income stream and you still have your shares intact. Now, so two things, number one, let's go and check the probabilities here. Hang on for one second. Okay, I'm back here. So I wanted to bring up the probability calculator. So one of the things you can do to help you decide, well, what strike price should I choose? How do I know where Apple's gonna go? I don't know if it's gonna go up to 150, maybe it'll go up to 170 or maybe it'll stay at 110, who knows? So you can always check the probability calculator to see what the chances are of the stock moving from point A to point B. Now, here in the probability calculator, we put in the current price of 117 and we've used the January expiration date, which is 97 days in the future. Future volatility, 50%, this is a percentage number. You just type in the number. Apple's volatility, you can always check the numbers at ivolatility.com. So you go and put in 50% here and you wanna know what the chances are of Apple going from 117 all the way up to 150. This is our target boxes. You put the same number in both target boxes, 150. Click on go and here's what it's telling you. It's telling you there's an 83 and a quarter percent chance that Apple will stay below 150. Conversely, over here, there's 16.75% chance that Apple will move above 150 by January 97 days. So you have to decide, okay, so if I don't, am I comfortable selling Apple at 150? If so, well, there's only a 16.75% chance that Apple will move up that bar. So there's a pretty decent chance that you won't have to sell out your shares, okay? So use the probability calculator, take a look at the numbers, change the expiration dates here so you can see what the chances are of you having to potentially sell your shares out in the future. Now, we wanna talk about very important here. The one thing that I had mentioned before is that you wanna make sure you don't sell a strike price that'll take you out of the trade below where you got in because then you'll possibly be selling for a loss. Let's just say, let's go back to our option chain here and let's just say you bought Apple for $130 a share. Like recently, when Apple made a high, you got in, you bought it for $130 a share and now it's trading at 118. So you're currently underwater. You got about a $12 loss going on here. And let's just say you wanted to sell the $110 call option in December that's paying out $12.20 per contract. So someone's gonna give you $1200 in order to sell your shares at 100 and hang on, let's use a better example here. So you bought it at 130, it's 118, you're underwater. So let's just say you wanted to choose $120 call option. Okay, so now you're gonna put in an obligation to sell the shares at 120 and someone will give you $715 for that contract. Okay, you're thinking, wow, $715, that's great. I'm gonna get $715. Well, if Apple moves above $120 a share, you're gonna have to sell your shares at 120. You bought them at 130, now you're selling at 120, you're $10 in the hole, but someone gave you $700. So your effective sell price is you take the strike price and add it to the money you receive. That's $127.15 is your sell price. Well, if you bought it at 130 and you're now selling it at a net price of 127.15, you're gonna lose money. So you don't wanna pick up a strike price that's gonna take you out of the trade for a loser. So if you bought the shares at 130, it's at 118 now, yes, you're underwater. But you need to make sure you sell a strike price that will take you out of the trade above your cost basis. At a minimum, you can sell the 125 calls that are paying about $5.25 a contract. So you add 525 to the 125. So that'll take you out of the trade at $130.25. You bought it at 130, you sell this one, you'll get out at 130 and a quarter. So you make 25 cents overall. So you need to make sure, whatever your cost basis is in this example, 130, you need to make sure you sell one of these strike prices that'll, if you have to end up selling your shares, it'll take you out above your cost basis, very important there. Make sure you understand that. And lastly, if Apple starts in this example, if Apple starts running higher and you've sold that 150 call option and now Apple's all the way at 170, you're like, it's at 170. I don't wanna sell it for 150, what do I do? Well, you could always buy back the call option. You're not stuck in that trade forever. It's not a sentence where you have to stain it. You made your bed and you have to line it. Now, no, you could always get out of the trade. You can always buy that call option back. Now you may end up buying the call option back for a price higher than what you originally sold it for. So you may be locking in a loss on the call option itself, but you're making up that difference in the price appreciation you're getting from the movement in the stock. So if you bought Apple at 100 and now it's at 170, you've got $70 of price appreciation. If you sold the 150 call option at whatever price and now you have to buy it back. Yeah, you may take a loss on the call option, but it's being overtaken by the profit you make on the price appreciation of the shares of the stock. So there you go. Let's take a look here real quick. Let's take a look real quick. I wanna mention something to everybody. I will be giving a free online presentation at the VectorVest Financial Freedom Summit on October 21st, going a little bit more in depth in this covered call strategy. So if you're interested in signing up and listening to myself and many others who will be speaking about different trading strategies, sign up for free at the VectorVest Financial Freedom Summit from October 19th to the 21st, right here. You can register. What I'm gonna do is I'm gonna put a link in the description below this video. Read the description of the video. I'll have some links in there. One of them will be to sign up for the VectorVest Summit. So check the links down there. Also, in this YouTube video that you're watching, don't forget to subscribe. In the bottom right-hand corner of this video is the red subscribe button. Don't forget to subscribe so you won't miss any videos from me. Don't forget, please, give me a thumbs up if you like this video. Give me a comment below. Ask me a question in the comments. You can also email me with your questions. If you want, let's go to our website, smartopsandsell.com. The probability calculator. People always ask me where do you get the probability calculator from? Go on to our website. Go over to the More tab here. Click on Helpful Links, and the probability calculator is the first one right here. You can use that for free. Lastly, putselling basics. Make sure you download our free putselling basics guide. Talks all about putoptionselling. That's what we do here at the smartoptionseller. Free guide can learn about a great strategy. Lastly, services tab right here. We have two newsletters, smartoptionseller and vertical spread trader, both about putoptionselling. And lastly, our one-on-one coaching. We've gotten a lot of great students coming in. If you need a little help learning about options trading, consider our one-on-one coaching. People are finding it very helpful. Okay, so that's it for me today. I hope this has been helpful. I want to hope everyone has a great weekend and a great trading week next week. I will see everyone next weekend. So this is Lilo signing off.