It was another red day in the market as fears over interest rate hike continues to spook investors. Most of the stocks in my watchlists were in the red and even my beloved bank stock, Bank of America, closed lower.
My semiconductor chip company stocks, AMD and Nvidia, initially started the day in green but were also dragged down by the market at closing. I close my AMD PUT contract (details here) to free up capital to sell a ITM Nvidia PUT instead. The details are as follow:
Type of Option: Cash Secured PUT
Strike Price: $275
Sold when Nvidia was at $276 (ITM PUT)
Date of Expiration: 18 Feb 22 (36 days contract)
Premium Collected: $1,673 (6.08% returns)
I sold a PUT on Nvidia as I feel that owning at $275 is an attractive price for me. If I minus off the premium of $16.73, my average price on Nvidia is $258.27. Nvidia has been one of my high conviction stocks and helped me made good money in 2022. I am hopeful that they will have a good upcoming earning results, which can propel the share price further. Else, I will be happy to own the shares for the long term, because I feel that Nvidia will one of the biggest players in AI, data centers, crypto, gaming and metaverse.
The Price To Pay
As AMD share price has dropped by quite a lot since the day I sold the PUT contract, I had to close the contract at a loss. I paid $1,649 to buy back the AMD PUT contract and suffered a loss of $638 (-4.4%). The premium I collected from selling Nvidia PUT contract helps to offset this loss.
Selling Tesla LEAPS (20 Jan 23)
Tesla’s share price rose more than $30 on the day before, giving investor hope that it will start to rebound towards earning seasons. However, it plunges more than 6% yesterday. When I saw Tesla’s dropping more than $30, I sold this LEAPS, that was still profitable, before it was too late. I bought this LEAPS at $2.9k and sold it at $4.7k. While I could have sold when it was $6+k but profits are profits and no one can really predict the future.
Moving Forward
The market is likely to remain volatile until the day where the rate hikes are implemented, so I am reminding myself to take smaller profits whenever I can. Unlike 2021 where every dip was quickly bought up, this time round, every rally was short-lived. Thus, it is important that we have holding power to wait it out for the market to rebound. This holding power can be in the form of holding shares (for selling covered calls or cash-secured puts aka the Wheel Strategy) or very long term (maximum duration) options contracts (LEAPS).
***
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 