The market started with optimism that the Federal Reserves is going to deliver good news after their FOMC Meeting on 26th Jan 2022. It lasted all the way till Federal Reserves Chairman Jerome Powel gave his speech. I decided to close my covered call positions that are expiring in 2 days’ time, as the premium may get higher to buy back if the share prices continue to rise over the next 2 days.
So, for my 3 covered call contracts that I opened on 24th Jan 2022, I closed 2 of them on gains and 1 on a loss. The loss on Palantir was significant as the share price of Palantir started rebounding after I sold the covered call contract.
This is the risk that I have mentioned with regards to selling covered calls. When the share price spikes, you either let your contract gets called away and suffered a loss by selling away your shares (assuming the strike price is lower than your break-even price) or you suffered a loss through buying back the contract.
| Name of Stock | Strike Price (USD) | Premium Collected (USD) | Returns (%) |
| 29 | 94 —-> (50) | 0.78 | |
| Nio | 24 | 143 —-> (65) | 1.46 |
| Palantir | 11 | 14 x 156 = 2184 —-> (-1,428) | – 4.9 |
How Jerome Powell Spook The Market
However, during the Q&A with Jerome Powell, he said a few things that spook the market and the share prices started to tumble again. One of which was the labor market is strong enough to withstand interest rate hikes. See this segment:
Other negative catalysts include Jerome Powell not confirming that they would not raise the interest rate at every FOMC meeting when asked by a reporter on that. This could mean that the Fed could raise interest rates more than 4 times this year. Jerome Powell also said that inflation in December was slightly worse.
Opening New CC Contracts
When the stocks start to tumble, I started 3 new covered call positions with their expiration dates on next Friday, 4th Feb 2022.
| Name of Stock | Strike Price (USD) | Premium Collected (USD) | Returns (%) |
| 27 | 224 | 3.68 | |
| Nio | 23 | 151 | 3.56 |
| Palantir | 11 | 14 x 232 = 3248 | 11.9 |
If the share price continues to plunge, I will keep repeating this process of closing the positions and opening up new positions with a longer expiration date or at a lower strike price. I have until next Friday to wait and see how the prices for these shares move, before deciding what to do next.
This strategy helps me to keep generating returns when the share prices are falling and helps to reduce the average (breakeven) prices of the stocks that I own. The risk of this strategy is covered in my previous article and you can read more about it here:
How I Do Earn Even When The Stock Market Is Bearish?
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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:
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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
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Learning Investment With Jason Cai 
Hi Jason
Looks like you are pretty aggressive with your covered short calls. ITM calls with short expiry. Similar to your short puts which are also ITM at inception. If you get the direction right, really huge premiums collected. cheerio. Raymond.
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Haha, but if I got it wrong, it is huge loss as well…. but I think it stems from my lack of confidence on the current market, whereby the odds of stocks going down are higher than stock rallying in this year. Thus, maybe the number of wins when it comes to selling covered calls will outnumber the number of losses when I have to buy back the contract to prevent losing my shares. Having said that, I still hope for a great market rally because more than 95% are in long positions, hoping for the market to rise with time.
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