[18 April 22 Trades] Trying The New Strategy Of Selling Longer Dated CALL Covered Contract

On 18 April 22, the S&P 500 went through periods of red (down) and green (green) before closing flat.

I was eager to try out the new strategy of selling longer-dated covered CALL option contracts that I mentioned in my previous post.

I Discovered A Way To Generate Higher Returns From Selling Covered CALL For Low IV Stocks Like Apple

This strategy works better when the market is turning bearish, as the premium will fall faster with a higher delta.

Otherwise, the average monthly returns will be lesser than selling shorter-term monthly CALL option contracts.

So, I closed all my covered CALL positions in Tesla, Nvidia, AMD, Palantir, Nio, Pinterest, Apple, and Bank Of America, with profit.

I opened up 5-month call option contracts for Tesla, and Nvidia (2 contracts) at a strike price ($1250 for Tesla and $270 for Nvidia), higher than my previous PUT contracts’ strike prices ($1200 for Tesla and $267.50 for Nvidia), which is also the bought price of my invested capital on the respective stocks.

This means that if the contracts get exercised, I will earn a profit off my invested capital, as well as all the premiums I have collected from the past PUT and CALL contracts.

If the contracts are not exercised, I get to keep my shares, on top of the premiums collected for the current contracts.

If the share price plunges in the coming days or weeks, I will get a higher return by closing early, as the contract premium falls faster with a higher delta.

The only downside of this strategy is that the average monthly returns are not so great as compared to selling monthly CALL contracts.

For Palantir, I had to sell at a strike price ($20) somewhere near my breakeven price ($21) and open an (almost) 1-year long option contract as the current share price has fallen significantly from my bought price. Even by doing so (with a lower strike price and longer duration), the returns are not fantastic (3.51% for almost a year).

Moving forward, I intend to complement this strategy further by picking up (buying) cheap LEAPS contracts, so that any rise in share price can increase my returns on top of those that I have collected from selling the covered CALL contracts. This will also help to average down on the premium cost that I have paid for my LEAPS positions previously. But the LEAPS contracts will be for companies that I believe in their long-term prospects, such as AMD and Apple.

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:

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?

Also, check out my trading strategies in different market conditions, whether it is bullish, bearish or volatile:
How Not To Lose Money In Trading? | My Trading Strategies For Bullish, Bearish And Volatile Market

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)

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)

Follow me on your favorite social media platforms, FacebookLinkedIn, or Twitter, to get notified of my latest blog posts. Or join our investing/ trading community at Telegram to exchange ideas or ask questions relating to investing/ trading.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s