On 9 Feb 2022, the premium fell (due to Implied Volatility (IV) dropping) and I closed the contract by buying it back at $1062, thus making a profit of $538 in 2 days.
On the same day (9th Feb 22), I sold another covered call contract on Tesla (SP $1090, Expiration date: 18 March 22) and collected a premium of $1,595.
The stock market then went down on Thursday and Friday due to CPI data being announced at higher than expected. Tesla’s share price also dropped from $928 (9th Feb closing price) to $860 (11th Feb closing price), so did the premium for the covered call contract.
On 14th Feb, when the market opened and just before Tesla rises by another 3.7%, I closed the covered call contract sold on 9th Feb by buying it back at a premium of $677. Thus, the profit that I made for the 2nd covered call contract was $1,595 – $677 = $918.
So, the total profit that I made on closing 2 consecutive Tesla covered call contracts from 7th Feb to 14th Feb is $538 + $918 = $1,456.
I have explained further regarding this strategy of rolling my covered call contracts when the share price falls in the below article so that I can maximize the gains of selling covered calls: Why I Choose To Roll My CALL Option Contract When Share Price Falls
I also open up new covered call positions for my other stocks as the market rises. This is a summary of my new trades:
When the share prices increase, I am able to get a higher premium for selling covered call contracts with the same strike price (SP), as compared to when the prices are falling. This is because as share prices rise, the probability of hitting SP is higher as compared to when the share price was lower. Thus, the seller commands a higher premium for taking on a bigger risk of losing his shares.
My strategy for trading in a volatile and bearish market is to sell OTM CALL contracts and roll them if the share price continues to fall. If the prices stay stagnant and do not hit the strike price upon expiration, I get to keep the premium without having to sell away any of my shares. Thus, I can open up new contracts and keep repeating this process.
Update On My Tesla Sept 22 LEAPS
I have readers asking me about the status of my 8 x (SP $2,475) Tesla LEAPS, and whether I have sold them to cut loss. I am still holding onto the LEAPS though they have dropped to 10% of my average price. On 14th Feb, I added another 2 LEAPS to average down my price. So, the current breakeven average price of my 10 LEAPS is around USD2,112 per LEAPS contract.
I have shared the risks of buying LEAPS in this article and what I am doing to mitigate them:
The Risks Of LEAPS Options Trading & How I Mitigate Them
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:
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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