In this article, I wish to share with you why I spent USD76,000 to buy 47 LEAPS contracts, the LEAPS options that I bought and my market outlook for 2022.
The below table is a summary of the LEAPS contracts that I bought in December 2021. More details such as delta, share price when I purchase the LEAPS options can be found in this post.
2021 has been an amazing year for the stock market, with indexes such as Nasdaq, Dow Jones and S&P500 hitting all-time highs regularly every few weeks. Stocks like Nvidia, Tesla were all shooting to the moon and gave incredible returns for shareholders.
However, it all started coming down in the month of December with the rise of a new covid variant named Omnicron, which the world is still awaiting its impact in the coming months. Also, the Federal Reserve has started tapering its free money program and will raise interest rates next year to curb inflation.
So, it looks like 2022 is going to be a bad year of stocks, so why do I buy more now during these times? Why not just sell everything and go away?
Firstly, stocks will not go up forever, there will be pullbacks, corrections and crashes happening throughout the year, we just don’t know when and everyone else is always guessing about the market’s next month. I believe that corrections that happened because of fears and speculation usually are not as bad as those that happened because of real-life events, such as the Lehman Brothers Collapse in 2008 or the pandemic in 2020. So, I believe it is the perfect opportunity to buy stocks that are on discount now and hold them until they recover eventually.
Let’s assume that the worst happens in 2022, whereby interest rates are raised and free money stops circulating in the market. I believe investors will tighten their belt and spend only on strong companies that are consistently producing profits, and sell off the meme and speculative stocks with weak fundamentals or still making losses every quarter. That is human nature, when we are on a budget, we buy only the necessary items, i.e. prioritize our needs over wants. In 2021, there is so much money circulating in the market, so prices of not-so-great speculative companies are pushed up. In 2022, I believe that is going to change. Therefore, the majority of my portfolio is concentrated around the big techs FAANG stocks and semiconductor powerhouses like AMD and Nvidia.
What is Omnicron turns out to be extremely contagious and deadly? The world goes back to lockdown and countries will close their borders and businesses will revert back to working from home arrangements. If that happens, big techs and the semiconductors will again benefit from it because their products are in demand, just as how their share prices double in 2020 and 2021.
What abou the risks of inflation? The companies who are in dominant positions and have a strong following and competitive moat will pass on the rising costs of raw materials to their consumers, who have no choice but to accept the price increase as there are no suitable substitutes around. Think about this, if iphone 14, 15, 16 prices were to increase, will you still buy? If Nvidia or AMD increase their prices for their chips, will you still buy the computers with the latest chipset from these companies? Or if Tesla inceases its car prices, does that deter you from getting their cars?
Whatever the outcomes may turn out, I have given myself enough leeway to manage the risk of LEAPS options trading, by buying longer-dated options contracts and reducing my capital per contract. I have ample time for these fundamentally strong companies to regain their share prices and to hit all-time highs again.
I hope this sharing is useful to you and do check out the related articles to help in your investing/ options trading journey.
Related Articles:
Can I Do Options Trading With A Small Account?
The Newbie’s Guide To Options Trading
Update Of My LEAPS Portfolio & Revealing All My 142 LEAPS Open Positions
The Risks Of LEAPS Options Trading & How I Mitigate Them
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Keen to learn about options trading but do not wish to pay for expensive courses, this newbie guide will help gain the knowledge and fundamentals to understand options better. And it’s totally free!
The Newbie’s Guide To Options Trading
The LEAPS Strategy has helped me make more than USD120,000 in 2021. Here’s all you need to know about this strategy that can help you increase your wealth exponentially:
The Ultimate LEAPS Options Thread
Looking for ideas on what stocks to invest in or which stocks to trade? You can take reference from what I have been buying or selling. I try to update them as soon as I can in this section, as well as share my thoughts behind executing these trades:
MY TRADES
Excited to start your trading journey or perhaps try out with a paper trading account to build your confidence in trading? Check out this step-by-step to help you get started:
How To Buy Options on Interactive Brokers (Step-By-Step)
I watched tons of videos on YouTube since 2020 and if you are wondering if there are any useful channels that you can subscribe to for learning market trends, TA, FA, check out this compilation here:
My Secret Weapons For Options Trading: I Watch These YouTube Financial Channels Every Day
I concluded my first year of options trading with more than USD160k of gain, see how I do it and the capital I use for every month to give you a sensing of the percentage yield I get out of my gains:
1st Year Options Trading Recap: The Journey Towards SGD$217,509 Profits In 2021
This blog is as authentic and as transparent as I can share, I do not just show the wins and hide the loss. I have made some very bad decisions in the first 8 years of investing and paid a huge price for them. Here is the loss I have accumulated during these years. I hope you learn some lessons from my mistakes.
I Cut $135,715 Worth Of Losses In The Last 1.5 Months
Learning Investment With Jason Cai 
Hi Jason, Thanks for regular updates. I wanted your opinion please. I have 100 shares of Zoom ZM. cost basis $425.00 current price $181.94 I read that you recently sold a lot of shares at a loss. I don’t like the thought of selling and taking the loss on Zoom.😥 In your opinion, do you see any future value in Zoom. If you were in a similar situation, would you get out of zoom at this price and invest the money somewhere else?
best regards
On Wed, Dec 15, 2021 at 9:18 PM Learning Investment With Jason Cai wrote:
> Jason Cai posted: ” In this article, I wish to share with you why I spent > USD76,000 to buy 47 LEAPS contracts, the LEAPS options that I bought and my > market outlook for 2022. The below table is a summary of the LEAPS > contracts that I bought in December 2021. More de” >
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Hi there, thanks for your question, it’s a great one! I had to cut loss on my legacy stocks as they were at a point of no return. Furthermore, those are SG stocks that I am unable to do options on. I didn’t do much research on Zoom so I can’t comment whether I am bullish or not. However, as the world moves towards endemic living, we are most probably going to have more of back-to-office and face-to-face meetings rather than over Zoom. Having said that, Cathie woods is still very bullish on Zoom because she felt this could be new norms. If Zoom has a part to play in the metaverse, I think there is still upside left in the stock. Your loss will be pretty huge (>50%) if you decide to cut it now. If you are still deciding, you may want to sell a covered call and collect some options on it. I did that for my pinterest, palantir and nio. Moving forward, you may want to study the fundamentals to see if the company is indeed making money or profits/ revenue is declining. That will help you make a more informed decision. All the best, pal!
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Hi Jason, thanks so much for your reply.. I am not very familiar with this wordpress thing and how it works, so didn’t check your reply here. saw your reply now and all this time I thought you didn’t reply ): will keep a close eye on zoom. thanks once again. Hope next week is much better and hope to make some money…
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Please don’t mention it! Oh, I have dropped you a mail too. Maybe you can ask me questions over there too. All the best for your investing journey 🙂
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Hi Jason – Have you ever thought about purchasing SPY or XLK leaps?
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Hi there, great question! I do not really like buying LEAPS on index funds because I think they move too slowly. I prefer to invest/ trade on the biggest tech companies because in reality, they are the heavyweights supporting the whole market and their huge price movement complement the power of LEAPS. For slow and steadily rising stocks or sideway stocks, selling covered call may be a better idea.
I share some pros and cons of buying ETFs in this article:
https://learninginvestmentwithjasoncai.com/2021/12/22/the-metaverse-etf/
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