CONSISTENCY
This is a very difficult topic because personally I am very bad at this even now as i write. I think for many others it is also the same because to be consistent in doing something takes really a lot of effort and determination.
Just about 4 months ago I was in a “rah rah” mood and started to exercise and wanted to keep fit. I started exercise after a session with my mentor and he said that you need to set goals and one important goal is to keep yourself healthy because you can make as much money as you can but if you do not have a good health to enjoy it, it will be pointless. Really, I am in my mid 40s and I had not done any real exercise for the past 10 years. You know things are so busy at work and by the time weekend comes, you are so busy with the kids, there is never time to exercise. That was my personal excuse I used for not exercising 😝. What’s yours??? 😏
Anyway, I started my exercise regime with a boost…. I searched the Youtube and looked for a suitable exercise to start. I found this “7 Minute Exercise” and pulled my bum out from bed every morning and there goes the 7 minute exercise music video every morning….one two three four….. It was torturing considering you had not done this for the past 10 years… 😓 I topped up the regime with weekend 1-2 hours walks at the park.
Within one month, I felt that I lost weight, felt good and I bought myself 2 sets of new “Slim Fit” shirts 😎. The irony is just some weeks ago I donated all my slim fit shirts that I could not fit because of a bulge in my belly since 5-6 years ago.
Of course the subsequent events is going to relate to many of you…. My regime is disrupted because the covid lockdown came and I started to slow down the exercise and subsequently stopped 🤣. I had left an “excuse” slip in and destroy my regime 😤. You know there is always a “Devil” in you that will 😈 go against anything good and influence you to do the “wrong” and he can be easily successful to do that…if you are not strong and determined on the “WHY” you will fail….
I am totally aware of what I have done, I just need to get through it and find a really strong reason to continue…so the next action I will take is REINFORCE the WHY… Go stick the your kids & family photos beside your bed if you want to have a long life to see them grow…
It is going to be another torturing event….but lets face it, nothing is going to be easy in life and there are going to be a lot of obstacles and 😈 to detour your life goals…you just need to be strong willed and look at where your will be if you are CONSISTENT in what you are doing and eventually you will be there….
I wish you all the success in achieving your “Goals” but just remember this word “CONSISTENCY” is key…. 💪
MARKET UPDATE
SPX
SPX retraced this week
Nobody can run forever and not stop and rest. Even the guy who ran the furthest without rest “Dean Karnazes” went 560km in 80 hours. Eventually he had to stop and rest.
I guess SPX is taking a breather last week as it went up for a month now and taking a breather. For the first time since, the week closed lower than it opened. SPX closed down 42 points to 4327. Not much but I think it is enough to start shaking up the market a bit.
It is not going to be easy to get SPX down as you can see the intraday movements is quite volatile with the Bulls putting up their defense every step of the way. Overall on a longer term, this year we should see SPX going up higher but just be ready for a bumpy road along the way. For Options traders, you can start collecting premiums on the shallow dips to improve your returns. For those who are only invested in stocks, need to look at how we Options traders do that as it will really make a difference to your overall portfolio performance.
NDX
NDX also retraced this week....
The NDX shown similar patters with the broader market. The big boys FAANG were all in fatigue and declined by end of the week. The strongest running of them all Apple and Google also started to wear by Friday.
Really, I want to see these FAANG come down more so there are more opportunities for reentry. At the moment, I am out in most of them and for Google, I closed my short call position after rolling in 2 months as it was just too far away ITM. I took up an Iron Condor position about 2 months back and Google never even taken a breather down.
Keep an eye out on stocks like FB, which has now retracing towards 50 EMA and the 330 level is a level to take note.
330 is a significant level to monitor any potential trade entry
CSP PORTFOLIO PERFORMANCE (UP 15.9%)
(Portfolio performance is on MYstylework’s Portfolio and is not a recommendation to buy and for informational purposes only. You are adviced to seek your own professional adviser’s views and perform own due diligence when evaluating any stock, options or investment trades)
It’s expiry day again. As we had lesser trades in the July cycle, one CSP on Nike expired worthless and one CC on GDRX expired worthless. We rolled one position on SKLZ with additional premium of $120.
One position which gave-up much of the profits todate is GDRX, which has declined by around 10 since we were assigned the stock at $40. The sharp drop in price since limited our opportunities to collect more premiums. Nevertheless, the total premiums we collected on this stock is still more than the unrealised price on the stock and we are still on a net net gain position on this. So one important criteria in trading this strategy is you got to ensure that you do not mind to own the stock traded as a long term investment for you, in event you get into such positions and you also got to ensure that the stock on a long run will be higher than the price you can be assigned. Reason being, these would be temporary loss positions but on a longer term you will be better off than purely investing on stocks because you have the ability to generate monthly income from the stock regardless of whether you own it or not.
We are waiting for further retracements on the market before we put in more trades. As for the China tech sector, the recent rebound in the prices have seen the CSPs recovering from the losses and should expire worthless or around the strike price come end of this month. We do not mind even getting these stocks assigned as the CSP strikes were at decent valuation and the recovery in these stock prices will provide good upside for more premiums to earn when we do CCs if assigned.
These are few ways to get better than the 2% targeted returns if you play by the rulebook and be patient on your portfolio. This kind of portfolio is really slow and boring for traders like me but very suitable for busy professionals who don’t even have time to finish their work in their day job not alone to ask them to trade more active portfolios. After all the targeted returns of 2% a month with no more than 30 minutes a month is a well trade off for the little time they have to invest to manage this kind of portfolio. 😅
DEBT FREE CHALLENGE
We kicked start this portfolio and is moving on well. This week, I found out from the bank that the bank interest is not 5.5% but only 3.5%. The lower interest is even more easy to cover.
You can watch the show (FB Live Show) which I explained about this debt free challenge…
The great thing is I even found out a solution to pay only 30-40% of the bank interest but use 100% of the cash to generate income. What this basically mean is that you pay around 1% to the bank and then generate 23% returns net. ☺️
We will give you updates on this debt free challenge on a monthly basis thereafter.
SYNTHETIC STOCK
Do you recall that at one time there was all this hype in the market on “AAA LV” bags? If you don’t know what is “AAA” proves you are still young and probably a millennial. During my times, the girls used to flock to places like Bangkok, Patpong Market or Silom Market to buy fake LV bags which have very high quality and an ordinary person may even mistake it as real. AAA means highest grade, and there are lower grades of AA and A. The reason they buy it is because they want to have an LV bag and because we just started working, there was hardly any money left every month, let alone owning a genuine LV bag is far from reality.
Twenty years on, we can buy a LV bag anytime but of course our priorities have changed now. From owning luxuries, many of us need to think how we can feed our children. 😅
Many people don’t trade stocks because they thought that it takes a lot of capital to trade stocks, especially on the US markets. Apple shares today is $146 and to buy 100 shares, you’ll need to fork out $14,600 cash without margin. Even if you have a margin account, you’ll need to have $7,000 in your account for that. That’s a real lot of cash. Just like my AAA LV bag story, a lot of people cannot afford it and can only dream of owning the shares and profit from the stock market.
What if I told you that you can actually, have the same 100 shares but at 1/6th of the price? It is an AAA quality maybe even better and more real. 😏 We do that by using Options to create what we call “Synthetic Stock”. Remember last week’s newsletter Issue #19, we taught you how to build stock like a lego block? This week, we will show you how to do that and what it looks like in real example. You cool on this?
We’ll show below an example how we structure close to 100 Apple stocks using options and compare the effects of using Synthetic Stock with Options as opposed to buying the real stock.
Assume, we start off with current share price of $146.39 and buy 2 calls to create close to 100 Apple stock. In our example, we could only get close to 96 shares, not perfect but lets just use that. Remember our lego block, to build whatever number of stocks you want, just add up the deltas and you’ll get there. Our example we do 2 Calls with DTE 17 September, 150 Call (Delta 54) and 145 Call (Delta 42). Add up the Deltas, you’ll get 96 Delta which is equivalent to owning 96 Apple shares. We assume we buy this 2 calls and at the same time buy 96 Apple shares and share price move up by $10 to $156.39 by 31 August. The effects are illustrated below:-
Illustration of Synthetic Stock using Options
In above example, you’ll see that by using Options, you can use lower Buying Power (Capital is 1/6th lower) but mirroring the effects of stocks. By using, options our returns on investment (ROI) is amplified by almost 5x! That’s real efficient use of capital.
We can simulate the effects of Options using the analysis functions in broker platform
The great thing is before you even do any trades, we can use the broker platform to estimate the effects so that you are clear what kind of risk and returns you will get before punching the “Buy Order” send button.
But please remember, there’s always a catch as every “Gimme” there’s a “Gotcha”. As you are buying calls here, if price don’t move in your direction fast enough before expiry of 17 September, your Calls will lose in value. But as Options traders and Lego builders, we always have some spare blocks to add on wings to our “Car” at times of need to rectify any situation to minimise damage or even improve profitability 😎….
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DISCLOSURES
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options: https://www.theocc.com/components/docs/riskstoc.pdf
MYstyework is an Online Financial Literacy Educator and materials provided is solely by MYstylework and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. MYstylework, through its contents, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. MYstylework is not in the business of transacting securities trades or an investment adviser.