The US stock market continued to fall on 13 June 22 and S&P 500 officially entered a bear market, down 20% off its Jan 22 peak prices. The tech-heavy Nasdaq is now down over 31% since the start of the year, as even the most reliable tech companies have seen dramatic cuts to their share prices.
The drop is significant as the PUT contracts that I just bought on 10th June 22 have turned profitable. Tesla’s share price drop also meant that the premium for my covered CALL contract dropped by USD1.1k in just one trading day.
Rolling Tesla Covered CALL Contract
I closed my Tesla Covered CALL position to lock in a profit of USD1,100 in 1 trading day and I opened up a new covered CALL contract at a lower strike price, expiring on the same date as the one that I have just closed and collected the same amount of premium (USD9.5k). Further details are below:
This method of rolling covered CALL contracts in a bear market has been shared many times on this blog, if you are unsure, you can refer to this article for more explanation:
Why I Choose To Roll My CALL Option Contract When Share Price Falls
Building Up The LEAPS PUT Portfolio
The LEAPS PUT contracts that I bought one trading ago are turning profitable and I have added 3 more LEAPS PUT contracts, 2 Meta LEAPS PUT and 1 BABA LEAPS PUT to this new portfolio. These 2 companies have been beaten down recently and I think they are not strong enough to survive another onslaught that is coming ahead.
Meta’s share price has already dropped near to the lows of the pandemic crash.
Alibaba has dropped to a level even lower than the lows of the pandemic:
My Current Strategy: Executing Plan B
In a previous post, I shared the Plan B of saving my LEAPS CALL portfolio, which is to buy LEAPS PUT to hedge against my top 4 holdings, which made up 70% of my 453k LEAPS portfolio. So, I am using the profits that I gained from rolling covered call to build this new LEAPS PUT portfolio, which I intend to keep to 10% of my LEAPS CALL portfolio, which is around 45k. If the market really crashes by another 20%, then this portfolio will generate good returns to offset all the losses in the other portfolio. If not, if there is a strong rally, I will lose this 10% in exchange for a lower loss for the LEAPS CALL portfolio.
Concluding Thoughts
There have been a lot of doomsday talks ongoing in the whole financial space, referring to the current market crash as the worst ever. However, not many people are talking about the opportunities that are present and how to capitalize on the downtrend.
I think shorting the market is one way to benefit from the crash but it is too risky because if the market suddenly does a U-turn, you will scramble to cover your losses. There may be an unlimited loss, especially in a short squeeze situation, where the share price spike up to “punish” the short seller.
In my opinion, buying a PUT is safer as the maximum loss is capped at the premium paid for the PUT contract. If the market keeps crashing, the premium for the PUT contract will keep rising as you have already locked in the selling price when you open the contract.
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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 on executing these trades:
MY 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)
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Learning Investment With Jason Cai 