Goodbye AMD, Nvidia PUTS, Hello Meta PUT

On 5 November, I closed my AMD and Nvidia PUT contracts that I sold just one week ago, bagging a 3.4% gain in 4 days for AMD and 5.37% gain in 8 days for Nvidia.

Details of these 2 PUT contracts are as follow:
I Sold An AMD PUT Contract And Collected 4.36% Returns In 18 Days (1 Nov 21)
I Sold A Put Option Contract For Nvidia (Again) On 28 Oct 21. Why?

The bullish run for these 2 semiconductors giants continued this week as they both rose above my contract strike price. And with more than 70% of the target (total premium collected) already achieved in just a week, I decided to close the contract and lock in the profits. With this move, I no longer have any risk of the contract being exercised and having to buy 100 units of the company’s shares. In 3 weeks (from 15 Oct 21 to 5 Nov 21), I have collected a total of USD$3225 of premium by selling and closing 2 Nvidia PUT contracts and 1 AMD PUT contract.

Unlike LEAPS that has unlimited upside, the maximum returns that we can get when selling a PUT or CALL option is the premium collected.

For the AMD contract, the maximum return is 4.36%, thus the current 3.4% gain is 78% of the maximum gain. For the Nvidia contract, the current gain of 5.37% is already 71.6% of the maximum gain of 7.5%. Thus, it makes sense to close these contracts when most of the gains have already been achieved in the shortest time.

With the capital freed up after I close these 2 contracts, I sold a Meta (Facebook) PUT options contract with details as follow:

Type of Option: Cash Secured PUT
Strike Price: $365
Date of Expiration: 3 Dec 21 (28 days contract)
Premium Collected: $2575 (7.05% returns)

I have a strong conviction for Meta and currently own 17 LEAPS contracts for Meta. I believe Meta’s shares are undervalued now, given all the negative news and publicity surrounding the company in the past few weeks, causing the share prices to drop quite a bit. However, the fundamentals are still strong and Meta’s most popular apps such as Facebook, Instagram and Whatsapp still have a very high adoption rate and are part and parcel of our lives. That gives Meta a very strong moat as they are not easily replaced by their competitors.

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