When the stock market was on a bull run in 2021 and 2022, everyone was a genius when it comes to predicting what stocks to buy and how to invest/ trade. In 2022 where we are seeing more red days than green days, the “hot picks”, “10x stocks” videos or articles are starting to dry up. In a previous article, I shared my view on the market outlook in 2022. In this article, I wish to share with you my strategies for trading in 2022 and I hope they can be of good reference to you.
Strategy 1: Take Small Profits
The market is likely to remain volatile until the day where the rate hikes are implemented and the market has absorbed the event completely. So, I am reminding myself to take smaller profits whenever I can and not wait until the market suddenly dips to see my profits disappear again.
Strategy 2: Holding Power
Unlike 2021 where every dip was quickly bought up, this time round, every rally was short-lived. Thus, it is important that we have the holding power to wait it out for the market to rebound.
This holding power can be in the form of:
1. Holding shares (for selling covered calls)
2. Holding cash/ collateral (for selling cash-secured puts)
3. Holding very long-term options contracts (LEAPS) to have enough time for premiums to increase with share price gain, before selling them for a profit.
Strategy 3: Moving More Funds Into The Wheel To Earn Monthly Income
I will cut my LEAPS allocation if there are any opportunities to take profits on them and move the funds to do the Wheel strategy. This will allow me to continue to earn some income through selling options contracts, even when the market turns bearish, as illustrated in this case.
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.
My LEAPS Portfolio
This is an overview of the 155 LEAPS contracts that I currently own:
I have been buying the dip since late Nov 21 but I have bought many LEAPS that are expiring only in Jan 2024, as that gives me a long runway of 2 years to see them grow and turn profitable. And I have been clearing (selling) those LEAPS that are expiring in 2022 in recent months, as they run the risk of expiring worthless since most of my LEAPS are OTM LEAPS.
I hope this sharing is useful to you as you navigate through the uncertainties and challenges that 2022 brings and may you continue to do well whether you are investing or trading. All the best!
***
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)
If the bear market in 2022 is making feel depressed as your stocks come tumbling down, read this article to find out how you can use options trading to help you claw back some of your losses as you await market recovery:
How I Do Earn Even When The Stock Market Is Bearish?
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 