Feburary is another volatile month for the stock market. It started with a rally during the Chinese New Year period and when things are recovering, the worse than expected CPI data, alongside statements from Fed officials start to incite more fears in the market again. Then, the uncertainties of the Ukraine war also spook the market further.
I have previously shared in this article on my trading strategies for bullish, bearish and volatile markets:
How Not To Lose Money In Trading? | My Trading Strategies For Bullish, Bearish And Volatile Market
So, in this article, I would like to share with you how I use my strategy for trading in volatile market to earn USD5446 this month.
On 3 Feb 22, my previous Tesla PUT contract of Strike Price (SP) $1,200 was exercised before expiration date of 4th Feb 22. So, I sold a short covered call contract and collected a premium of USD960.
On the following week, 7th Feb, I sold a new covered call contract, with SP $1,100 which was above my average price of $1,080. However, just 2 days later on 9th Feb, a drop in IV meamt that I could buy to close the contract and earn a profit of USD538.
I sold a new OTM covered call contract on 9th Feb 22 and again closed it on 14th Feb 22, when the share price of Tesla dropped, to earn a profit of USD918. On the same day, I opened up another covered call contract and closed it just 3 days later, to earn a profit of USD350.
I kept repeating the same strategy for the next 3 trades on 17 Feb, 22 Feb and 23 Feb and my total profits secured for Feb was USD3,946. Together with the premium that I collected for the covered call contract that I sold on 24th Feb 22, where I received a premium of USD1.5k (SP $915, expiry date 1 April 22), my total premium collected for Feb adds up to USD5446.
So, if I do not roll the contract further and Tesla’s share price remained lower than USD915 by 1 April 22, my returns for the months of Febuary and March would be
5,446/ 108,000 = 5%
which averages out to 2.5% per month.
If Tesla’s share continues to fall or if the premium of the contract falls again before FOMC meeting in March, I will continue to the same strategy to earn more premium. If Tesla’s share price spike up more than the 20% buffer that I set aside for my OTM covered call, then I may close the contract at a loss. If it is within the 20% buffer, then I will still earn from the contract as it expires worthless.
I hope this sharing gives you some perspective on how to trade using a simple method to keep earning some income/ returns during these volatile times.
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