How I Do Earn Even When The Stock Market Is Bearish?

The US stock market continued its second day of massive selling, especially after the Federal Reserve’s minutes of policy was announced. With the recent selloff in December, it must have been a depressing phase for investors to see their stocks keep falling in share price and losing value.

However, with options trading, it is still possible to earn some returns out of this bearish market. Here is what I did with selling covered call options.

I have 3 stocks that are suffering paper losses and they are Nio, Palantir and Pinterest. I have 100 shares of each stock (except Palantir which I own 1400 shares) due to their previous PUT contracts being exercised. The bought price, breakeven price and current share price are summarized as below:

Name of StockBought Price (USD)Breakeven Price (USD)Current Price (USD)
Pinterest8064.5032.84
Palantir26.7921.5516.96
Nio5545.4829.88

On 29 Dec 21, after another red day, I sold covered weekly call options on these 3 stocks, expiring on 7 Jan 22 (7 days) and the details are as follow:

Name of StockStrike Price (USD)Premium Collected (USD)Returns (%)
Pinterest361031.59
Palantir1814 x 59 = $8262.73
Nio29791.74

The total premium collected is $1,008, 2.4% returns in a single week based on my breakeven price. I have already closed my Pinterest contract yesterday (5th Jan 22) and the nett gain is $89.

The risk of these trades would be that if the share price suddenly increases by a lot at the expiration date, then I may have to sell the shares at the strike price, which is way below my breakeven price, thus incurring a bigger loss. I mitigate this risk by selling weekly covered calls, as the probability of price increase over a week is lower as compared to a monthly option. Even if it does increase above the strike price, I will close the contract by buying the option back at a smaller gain or sometimes incur a small loss. But if share prices continue to stay sideways or go down, then I will earn a decent return with the premium collected. That is the advantage of using the Wheel strategy over LEAPS in a sideways/ bearish market.

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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

4 thoughts on “How I Do Earn Even When The Stock Market Is Bearish?

  1. Jason I am reading and studying every post that you have made. I really appreciate all. I’m getting ready to pull the trigger but I would really like to know a few names (by rank if possible) the broker/brokers that you would suggest as far as ease of use and tradeable platforms. Any help would be appropriated.

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  2. Hi Jason, do you think it will work out if we use your leaps options method, buy v far otm calls with the longest expiration date out ( so that cost is kept to the minimal) , then sell covered calls against it, creating a poor man’s covered call?

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    1. Hey Chris, that’s a great question. Personally, I am not too keen to try PMCC and there are a few reasons. Firstly, the LEAPS may be called away prematurely if the shorter leg sell call is exercised. Also, ibkr only allows me to do the spread for one time (the first time). Subsequently, when I tried to sell calls against my LEAPS, it is treated as a naked call, which is not allowed for a cash account. Lastly, I have not really figured out how this PMCC strategy can work with OTM LEAPS, there must be a catch somewhere. Otherwise, people would use a very low premium to try to simulate owning 100 shares and keep selling CALLs against it and make lots of money. Imagine OTM AAPL LEAPS in Jan 2024 cost $500 but I can sell an ATM CALL contract and collect way more premium than my capital.

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