[3 Feb Trades] As Market Falls, I Continue To Sell Covered Call, OTM Call This Time Round

The market fell on 3 Feb 22, dragged down by poor performance by Meta Platforms (Facebook). The growth stocks that I owned (Nio, Palantir, Pinterest) continued their downtrend from the day before (2 Feb 22). In a falling bearish market, my strategy is to sell covered calls to earn some premium. So, I open up the below positions over 2 Feb and 3 Feb, with an expiration date on 4th Feb22.

Name of StockAverage Price (USD)Strike Price (USD)Current Share Price
(USD)
Premium Collected (USD)Returns (%)
Pinterest63.531.524.51600.94
Nio43.52523.13250.57
Palantir21.781412.4514 x 13 = 1820.59
Apple181.5177.5172.90450.24
Tesla1082950891.142600.24
Subtotal572

The returns are much lower than my previous covered call contracts, not only due to the shorter expiration date of 2 days (4 Feb 22), but also I sold OTM call contracts instead of ATM call contracts. This is to lower the risk of a price spike and I have to frantically buy back the contracts at a loss to prevent them from being exercised.

I am selling at a price that I feel will not (or low chance) be reached by the expiration date. If the share prices of yesterday’s closing remain on 4th Feb or close lower, I do not need to sell away my existing shares.

***
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2 thoughts on “[3 Feb Trades] As Market Falls, I Continue To Sell Covered Call, OTM Call This Time Round

  1. Nice to stumbled across your blog!

    I noticed that your Nio average price is pretty high.

    Didn’t you took the opportunity to average down at the recent lows when it hits USD 19+? 😅

    I sold 2 lots of Nio PUT options recently expiring on Feb 18 with a strike price of 20 but unfortunately it is OTM as the price is rising again…

    I wanted to double down my position at an even lower price below 20 but it seems like I’m not successful now…

    I’m now strategizing if i should buy to close and lock in my profit and then open a new position for an even lower strike price at a later expiry date.

    But the premium isn’t attractive if i sell new puts at strike price of 20 or lower…

    I might revisit it again if the share price drop again to take advantage of the jump in premium…

    Like

    1. Hi R, thanks for dropping by! Yup, I sold PUT on Nio sometime back last year when prices are still very high. I did not average down as I do not wish to increase my portfolio allocation to growth stocks. Everything is looking attractive now and considering the macroeconomic environment whereby growth stocks could be hit hardest, I choose to trade/ invest on the mega caps for now. And I still have so many stocks that I want to buy but cash is very low currently, after buying the dip in Dec and Jan 🙂 You may want to sell ITM PUT for a higher premium and also increase your chances of getting the Nio shares.

      Like

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