The stock market rallied for the 4th straight day on 18th March 22 to cap the largest gain in the three major indexes (S&P500 ~ 6.2%, Dow Jones ~ 5.5% and Nasdaq ~ 8.8%) since November 2022.
In a market rally like this, I hold off selling covered calls for all my stocks and focus on selling PUT contracts. These strategies are explained in my previous post:
I Did Not Predict The Rally, I Simply Prepared For It | What I Am Doing Next
Tesla PUT Contract
I closed the Tesla PUT contract that I sold just 2 days ago on 16th March to earn a profit of USD900. I then opened a new SELL PUT contract at a higher strike price of USD750 with the same expiration date of 22 April 22, and collected a premium of USD1.5k (2%)
Nvidia PUT Contract
I also sold a Nvidia OTM PUT with Strike Price (S.P.) USD215, expiring in 22 April 22 (35 days), and collected a premium of USD341 (1.59%). If Nvidia stock price stays above USD215 (current price USD264), the contract expires worthless and my cash reserved will be free up for other investment/ trading opportunities.
If both Tesla and Nvida’s share prices keep rising over the next few weeks, I will keep rolling the contracts (close the existing and open a new one) to collect more premium. I have explained this strategy here:
Why I Choose To Roll My PUT Option Contract When Share Price Rises
Nvidia CALL Contract
I sold a Nvidia covered contract with strike price USD280, reason being my breakeven price for Nvidia is USD247. So, even if the contract gets called away (when share price of Nvidia rises above SP of USD280 on expiry date), I will be making a nett profit of USD3.3k ({280-247} x 100) for this contract. I will use the capital free up to sell OTM PUT or do other trades.
Final 2 Tesla LEAPS
I bought my last 2 Tesla LEAPS contract (expiration date 16 Sep 22, SP USD2475) to make it a total of 40 contracts for this LEAPS call. From the initial high premium price of USD3.17k when Tesla announced their record 2021 Q4 deliveries, to the current premium price of USD150, I have averaged down on these LEAPS contracts and my current average premium price per contract now is USD680 per contract. I will not be adding any more LEAPS contracts from now onwards. Hopefully, there will be a rally for Tesla stock and I can recoup my capital and make some profits before they all expire worthless.
Is This Rally The Final Redemption?
I have been waiting (if not praying) for a rally for since the dip happened in late Nov 21. It has been almost 4 months of pain whereby any rally was short-lived and not enough to breakeven for my LEAPS contracts. If the stock market can go on irrationally back to the all-time-high, I would want to sell all my LEAPS contracts and focus on just doing the Wheel Strategy for consistent monthly income.
This strategy may not generate as high a return as the LEAPS strategy when share prices are going up but at least it reduces the risk significantly of losing money or getting all my capital stuck when a reversal happens as time now becomes my biggest enemy.
I share previously on the pros and cons of each strategy in this post:
[Option Strategy] LEAPS Vs. WHEEL
I think it is over optimistic to expect the market to keep rallying because the Fed is raising interest rate slowly and not implementing QT (quantitative tightening) immediately. Sooner or later, the market makers (institutional investors) are going to lure everyone into a trap and then exit and the share prices will start falling again.
So, I am choosing to play safe and treat this as the last rally that is going to happen for this year. If the stock market unexpectedly rally for the rest of the year, then I will have strategies mentioned above to profit from it.
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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:
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
Want to learn more about Technical Analysis (TA) but find it difficult to grasp the concepts? This article brings you TA at a glance, and helps you understand key terminologies, indicators, and techniques used in TA to equip you with the knowledge that can empower you in your investing/ trading journey.
The Newbie Guide To Technical Analysis (TA)
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