The October Consumer Price Index (CPI) reading came in lower than expected at 7.7% and the stock market rallied on 10 Nov 2022.
I initiated a BULL PUT Spread aka PUT Credit Spread (3 contracts with a max loss of USD165 and max gain of USD1,335) on Apple stock.
Details are as follows:
I opened the positions when Apple was trading at USD143 and the contracts expire in about a week’s time. I wasn’t expecting Apple to close above USD155 for my max profits as there is a high chance that they may expire worthless (if Apple closes below USD150).
My intent is to capture the upside in share price over the next few days so that I can close the contracts at a profit. In the worst case where Apple’s share price drops instead of rises, my max loss is only capped at USD 165 and existing early may mean I lose less than that amount.
Over the next few days, the share price eventually rose to $148 and I closed the contracts with a profit of USD645, which is 390.91%, assuming my max loss of USD165 is my invested capital.
To learn more about how vertical spreads work, in particular, the BULL PUT Spread that can allow you to trade with a small account, do refer to these articles:
Vertical Spreads Options Strategies Explained For Newbies | A Simple Way To Understand And Remember Vertical Spreads
How Does Bull PUT Spread Work? | PUT Credit Spread Explained For Newbies (Part 2 of 4)
Points To Note
I am not sure about other brokerages but for the Interactive Brokers brokerage that I am using, I will need to upgrade from a cash account to a margins account to initiate vertical spreads contracts. That does not mean that I am using it to trade vertical spreads options. The margins are there in case there is not enough cash in the account if one of the legs is assigned early (which usually is rare) or the share price is in between the 2 legs upon expiry. That would mean that one contract expires In-The-Money (ITM) while another contract expires Out-Of-The-Money (OTM). When this happens, it is not a big risk as the spread will always have a max loss worked out, the options contract buyer just needs to manually activate the other leg to work things out.
However, to prevent such situations from happening, it is better to close the contracts before the expiry date if the share price is hovering around the strike prices of the vertical spreads contracts, or simply let the contracts expire out of the money if the share price is far from the strike prices of the two legs.
<< Subscribe to my blog to have all these articles delivered directly to your email address >>
*** SEE MY TRADES & PORTFOLIO ON PATREON ***
If you are interested to find out more about my options trades and investment portfolio, I will be updating them on Patreon (on the same day I made the trades), so do follow me there if you need some reference or inspiration.
*** EARN FREE MONEY ***
Sign up for WeBull Securities Brokerage and sure-win free shares:
Receive Free Money When You Sign Up With WeBull Securities Platform
*** FREE BEGINNER GUIDE TO OPTIONS TRADING ***
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
*** FREE MOTIVATIONAL BOOK ***
If earning more money from your investment does not excite you anymore, you may be seeking a purpose that brings fulfillment and meaning in life. I have written a motivational book that may be useful to you in some ways. You can also download a free copy here:
https://learninginvestmentwithjasoncai.com/finding-the-magical-realm-of-happiness-motivational-book
*** FOLLOW US ON SOCIAL MEDIA ***
Follow me on Facebook, LinkedIn, to get notified of my latest posts on social media. Or subscribe to my blog (scroll to the bottom of the page) to have my new posts sent directly to your mailbox.
*** BUY ME A CUP OF COFFEE ***
If my blog has benefited you in some ways and you would like to offer a token of appreciation, you may do so via this page. Thank you very much for your support!
*** MUST-READ BLOG POSTS ***
After accumulating more than 600k of unrealized losses on my portfolio, I wrote this article to encourage friends and investors who are also losing a lot of money to the market.
If You Are Feeling Depressed From Losing Lots Of Money In The Stock Market, Here’s An Article For You
In the 10 years of my investing journey, I have made many mistakes but also learned many lessons from these mistakes. I compiled the 10 most valuable lessons that I have learned and may they help you succeed in your investing journey.
Happy 10 Years Of Investing | 348k (Realised) Profit, 635k (Unrealized) Loss & 10 Lessons Learnt
The precious 6 lessons I learnt after cutting more than half a million of losses in the stock market through bad investments and risky trades.
6 Lessons Learnt After Losing 551k In 10 Years Of Investing & Options Trading | What Newbies Should Know They Start Investing/ Trading
How I managed to build a 1M investment/ trading portfolio despite coming from humble beginnings.
How A Poor Kid Got To A 1M Investment Portfolio | Tips & Principles Of Building Wealth
I did these 10 side hustles while holding a full-time job, so I share them here so you can be inspired to grow your wealth through a side hustle that you enjoy.
I Did These 10 Side Hustles While Working Full Time | 10 Side Hustle Ideas To Help You Earn An Extra Income
Struggling with inflation and high cost of living? Try these 10 methods to help you save money and accumulate more savings for investments or rainy days.
10 Ways To Save Money To Help You Fight Inflation & Rising Costs Of Living
Why I am building $120,000 of cash reserves in Singapore Savings Bonds (SSB) & 5 reasons why I think SSB is a worthy low or zero-risk investment that you can consider.
Why I Am Building $120,000 Of Cash Reserves In Singapore Savings Bonds (SSB)? | 5 Reasons Why SSB Is A Worthy Low-Risk Investment
Sharing why I am doing Dollar Cost Average (DCA) into SPY and QQQ ETF for long-term investments and a step-by-step guide to doing it automatically with Interactive Brokers.
Why I Am Doing DCA (Automatically) For SPY & QQQ For My Long Term Investment? (20% ~ 30% Upside Potential) | Step By Step Guide To Activating Automatic Recurring Investment On IBKR
Can options trading provide you with extra sideline income every month? In this post, I share my experience of generating income from options trading over the last 3 years.
Options Trading For Passive Income: Truth Or Myth?
Learning Investment With Jason Cai 