Options Trading Newsletter - Issue #21
STOP!!! Doing what you are doing and Read This Newsletter NOW...If you are not getting results in Trading The Stock Market or Want to Generate Income from the Stock Market...This Newsletter is your MU
SHOOTING BLANKS...
Recently there has been a lot of hoo haah... on Covid Vaccination Centres shooting blank vaccine syringes during the vaccination procedures. How true that may be remains a mystery but there have been a lot of videos circulating on Whatsapp.
Personally, I did not even see if my jab was a blank and the nurse just took prefilled syringes from a tray and told me it makes things faster if it was prefilled. Yes, indeed the whole process was really fast as I left the vaccination centre within 45 minutes from arrival.
Did not feel a thing after the jab but a lot of my friends went into fevers and some even got knocked out for 1 to 2 days. I am now being skeptical that all the Standard Operating Procedures (SOP) they were stressing everyday was ever complied in those centres. Well, I'll take it as a placebo then.
Come to think of it, we always shoot blanks in life. In fact, I probably shot blanks for 7 years before I got my first child. We would have continued childless before we made decisions to seek treatment to see which side are having the blanks. We went through a whole lot of process for 2 years from an operation, taking medication, drinking chinese herbs...yuccckkkk....cutting my favourite coke, kopi ais to the extreme getting my stuff sent to the lab for testing every month, you know what I am talking about, I don't need to elaborate.
Was it worth it? Yes, indeed...we have 2 lovely daughters today. Would not have happened if we ignored the problem and continued shooting blanks.
In other area, you might also be shooting blanks. Stuck in a job where it is unfulfilling personally or financially. Not getting good grades because we lack the study skills to focus on the right things.
Where am I getting here? Whatever you do and if you are stuck at where you are you have to assess your position and find a solution. If you don't, you will continue to be stuck there, shooting blanks...
"If you don't change direction, you'll end up where you are headed"
MARKET UPDATE
SPX
Last week we were talking about SPX taking a breather. On Monday it took a heavy fall and before you know it, it was just like the Red Bull F1 team going into a pit stop and done with in 1.82 seconds, claiming the fastest pitstop in F1 history.
Can you imagine it that SPX shot up thereafter reaching once again all time high. For those happy lot waiting for a retracement to do some shopping got into a disappointment. 😭
On Monday itself, I started to lock and load my positions during the dip and was not waiting and taking3 any chance. Whilst, the current portfolio was a sea of blood and if that happened to me a few years back, I would have wet my pants in panic. Thankfully, I have gone pass that already and as calm as I can be on the bloodshed going on, I continued to pick the dust for whatever I could. The premiums that day was so good as all the IVs increased so much and I got myself at least 25k+ new positions in just few hours. My work for the month is done!
NDX
4%+ jump in a week? It is really a crazy market. If you are not invested in this crazy market, you are missing all the fun parties the market holds far too often.
The week, before it was like a funeral with only red days and last week was like a rave party after the burial was done with on Monday. Talk about respecting the dead... 😑
Last week there was some internet outage and stocks like Crowdstrike (CRWD) shot up the roof...
Then came this "Metaverse" thing...and Facebook (FB) went to join the space party with Sir Richard Branson and Jeff Bezos, gapped up by almost $25!!!
Just the week before, remember I was waiting for FB to drop to 330 for an entry? On Monday, it only went down to 333, slightly short of my target. Dang....otherwise I would have "Metaversed" whatever that meant....
Frankly, it was only a few partygoers last week which pulled the market so high, I don't think it can hold so long... I am being selfish here, because I am not into any of those FAANGs now but loaded myself with a heaps of China counters. China is going south spreading fear on nationalization and turning companies into charities 💪
Unfortunately, I was stuck in some of these companies or to be charities (the online education companies). Sometimes these policymakers are real jokers... You know policy makers like to talk without substance and before you know it, they come out with another story next to clarify that is not what they meant but poor market losing billions in between...
But lets see how that unfolds. The fact is that it is not even 11.11 Singles Day sale yet and China already started the pre sale with stocks going as much as 50% off from its high.
Talking about pre sales, do you know how online platforms continue to record breaking sales yearly on their yearly sales event? In the past they really achieve double digit sales growth. But in recent years, they can't cope with it and they turned to pre-sales strategy. Meaning, one month before the sale, you can pre-order the products with a deposit at the sale event discounted price and on the event day you pay the balance purchase price. Then they capture, the sales into their event day sale and announce astronomical sales growth. But in actual fact the sales is like 1-2 months sales all packed to a single day!! 🤣 A great way to promote their stock...
CSP PORTFOLIO PERFORMANCE (UP 16.5%)
(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)
Last week was a real volatile week, with Monday's market having a bloodbath and from Tuesday to Friday, the market recovered and even surpassed the week's opening price level.
For the portfolio, Monday will see the portfolio returns drop by 1.5% in a single day. Having traded the markets for years, one of the skills I developed is to be immune to the market volatility and not to let emotion cloud your judgement.
There is a systematic way of generating income through the stock market and when there is a market drop, we also look at opportunities and not fret that the portfolio returns dropping by 1.5%. In fact, being Option sellers, I was busy looking for entry points the whole night entering into new positions for the September expiry cycles as premium shot up the roof due to the volatility. It also gave me a lower strike price as most of the stocks in my watchlist had dropped by 5% or more on a single day.
As I mentioned earlier here, the next days the market recovered and the portfolio returns returned to prior levels and the new positions are all profitable after one day in the trade. Further, because of the new positions entered, basically I can close shop for the rest of the month as the portfolio is already more than full. That's the beauty of this trading strategy...you don't need to spend a lot of time to enable you to generate 20-30% returns yearly and most suitable for busy professionals who don't have time and want to grow their savings in a quick but safe manner.
I LOVE MY LIZZARDS...
One great thing about being an Option seller is that we can plan out trades knowing our probability of WIN and also outcomes that will benefit us even if the trade did not go our way.
As opposed to an Option buyer, you will either WIN or LOSE. And the strategy is you need to have a risk return ratio of risking 1 for 2 gain. ie. You set your WIN rate to 2x your risk rate. Because every option you buy, you have to be directionally right to WIN in the trade. If it goes against you, you will rely on the expectancy formula to succeed. Normally, I would say 40% would suffice to generate your risk rate returns a month (if Risk Rate is 1% = Returns of 1% a month then).
But for that effort you probably need to do 10 trades, 6 lose and 4 wins. I have tried that and when you get 6 losses straight, and at the end of the month with all those stress and efforts, you end up breakeven or 1% up, you will start to doubt if trading is right for you. 🤣
Last week, when the IV of options was up in some ETFs, I did a Jade Lizzard, which is one of my favourite strategies when I do not have any other strategies to trade in between trade cycles. Short quick trades with expiry slightly above 30 days and normally I would exit within 14 to 21 days with 50% profit levels.
Below is the trade I did on EWZ, the Brazilian 25/50 Index ETF.
It basically comprise of a short call spread with $1 width strike. -40.5C/+41.5 for a premium of $24, max loss of $76. The the target is to sell a put which gives you at least a $76 premium. In my case, I sold a put at -36P for $78. Total premium earned, $102.
Here's the outcomes say you take this to expiry:-
EWZ shoots pass 41.5 - you will earn $2 profit.
EWZ stays between 36 and 40.5, you will get max profit $102
EWZ stays between 36, above 40.5 but below 41.5, you will get max profit on your short put of 78 and some loss between 0 - 76 depending on which end the price is, closer to 40.5, your call spread loss will be lower, net net, the trade will be a positive win trade.
EWZ falls below, 36, you get assigned the stock at $36 but keep the $102 premium, which makes around close to 3% discount to the strike price.
As fluctuations of ETFs are less rapid than stocks, you can sell calls after assigned to get more premium or wait for the ETF to recover to your strike and sell it back to market.
So on each count of scenarios, you will still WIN in the trade, how cool is that! Don't you want to be an Options trader???
I do Jade Lizzard on stocks/ETFs below $100 to get the best effect and less price volatility.
TRADERS TALK
Time passes so fast. I have done 6 Traders Talk since the show premiered on 15 June 2021. If you have not seen them, here's a link to see all past 6 shows, not to be missed because each one is special and have contents that will relate to you, I'm sure. View Past Traders Talk
I have even got the highlights here for a sneak peak...Sneak Peak Traders Talk
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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.