With US market going into a selling frenzy over the fears of the new Covid-19 variant, I took the opportunity to trim my LEAPS portfolio, as well as close my Facebook PUT options contract.
I sold off 2 Apple LEAPS that are expiring on Jun 22 and Sept 22 to take profit on the LEAPS contracts that have the shortest expiration dates in my portfolio. I also sold off an Alphabet LEAPS that is expiring in Jun 2022. Next, I sold off 3 Nvidia LEAPS and 1 AMD LEAPS as their prices have run up a lot in recent months and overpriced companies are usually the first to get slaughtered if the market reverses into a bearish trend. I also sold off 1 Tesla LEAP to take profits on the recent gains. Lastly, I close my PUT contract ending next Fri (3 Dec) and incurred a $500 loss. My trades are on the below table for reference.
The LEAPS returns for today (26 Nov 21) are summarised as follow:
I made a total of USD$5.8k selling off these LEAPS contracts today.
With all the profits gained and capital released from the recent selling, I did the most awesome thing of selling my first Tesla PUT option contract.
I am often in awe of traders who can sell a Cash Secured PUT contract as the seller must put aside collateral equivalent to the price of 100 Telsa shares, just in case the contract gets assigned.
The details of my PUT contract is as follow:
Type of Option: Cash Secured PUT
Strike Price: $1000
Sold when Tesla was at $1094
Date of Expiration: 31 Dec 21 (35 days contract)
Premium Collected: $5150 (5.15% returns)
Though it was an Out (of) The Money (OTM) PUT contract, the premium is still at an attractive return of 5.15% as the IV is high for Tesla (close to 70%) due to the volatility of the market.
There are a few scenarios that can happen.
Scenario 1: Tesla share price rises above current share price of $1094, remains at $1094 or even drops to $1001
I will not be buying 100 shares on 31 Dec 21 and will free up my capital for other trades.
Scenario 2: Tesla share price drops below $1000 on 31 Dec 21
I will be buying 100 Tesla shares to honour the contract but with the premium that I have collected, my average price will be $949.75, which is quite a decent price to own Tesla.
Despite the uncertainties ahead, I am bullish about Tesla stock as they are likely to meet the 1M sales target for 2021 and start producing more cars when the 2 Gigafactories in Texas and Berlin go into full operation in 2022.
After today’s trading, my total trading profits made in 2021 are USD$137,140.
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Learning Investment With Jason Cai 