The market started with another huge sell-off on the first day of the week (20 Dec) leading up to Christmas, but on Tuesday and Wednesday (21 & 22 Dec), we are finally showing signs of a Santa Claus rally.
These are the trades (captured from my trade logs) that I made this week and I will share my thoughts in a while. Do note that the time stated in the screenshot is Singapore time, which is 12 hours ahead of US time.
When the market was selling off on Monday (20 Dec), I sold off 10 Apple LEAPS to lock in the profits that I made over the past few weeks, just in case the market continues to sell off until next year, which would have turned my LEAPS from green to red.
On Tuesday (21 Dec) when the market was rebounding after another red opening, I took the opportunity to buy 6 Apple LEAPS and 1 Tesla LEAPS (the cheapest TSLA LEAPS option for Jan 2023). That brought the average price of my 5 TSLA LEAPS expiring Jan 2023 to $36.52. At yesterday’s close where Tesla’s share price shot up 7%, the last transacted price was $44.80, which means I have an unrealized gain of $828 per LEAPS contract. I have been buying the dip for the whole of December and you can read more about my thoughts in this article.
Apple PUT Contract
On Wednesday (22 Dec), I decided to invest another USD18.5k to sell an Apple PUT contract and collect a premium of $1325 (7.16%). The reason for selling an OTM PUT @ $185 strike price is because I believe that Apple’s share price will continue to grow in the coming weeks and I am locking in future gains. The ATM PUT options will yield around 4% but that is the maximum return even if Apple’s share price continues to rise.
The other reason for selling a PUT option is because I am interested to own the stock at its current price as I believe Apple will continue to be a dominant player in years to come. Apple has revolutionized our world with the invention of the smartphone, it has regained its position as the most valuable company in the world, its products are of premium quality and 99% made of recycled material and most importantly, they have a very loyal following, which means their products will always in demand, despite being more expensive than their competitors. I remember my first ever trade was to sell a PUT option on Apple at a strike price of $126 in late Feb 2021. 10 months later, the share price has increased by almost 50%.
Strategy for 2022
The selling of the PUT option is also aligned with my strategy for 2022 (that I mentioned in this article), which is to cut my LEAPS allocation and move the funds to do the Wheel strategy. This will allow me to continue to own Apple stock for the long term and earn some income selling monthly covered calls on it. I predict that the market in 2022 will not enjoy as high growth as it does in 2020 and 2021 and it may stay sideways for long periods. This is because of the monetary tightening aka closing the tap on free money printing. Thus, investors will become more prudent as there is less money to flow around in the stock market. If the market stays sideways or even goes downwards, the Wheel strategy will give us better returns as compared to LEAPS. Read more about the pros and cons of each strategy here.
I hope this sharing has been useful to you and I wish you and your loved ones a joyous festive season ahead. Take good care and have a really wonderful Christmas Day and New Year’s Day celebration.
Related Articles:
Why I Bought USD76,000 Worth Of LEAPS In Dec & My Market Outlook For 2022
How Does LEAPS Works And How I Use LEAPS To Maximise Gains?
[16 & 17 Dec 21 Trades] Sold AAPL LEAPS, Bought Adobe & Amazon LEAPS for The First Time
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MY TRADES
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