WHO IS SUCCESS FOR?
If you ask this question in a room of 10,000 when you do a speaking engagement....who wants to be successful? I would say 9 out of 10 times, the whole 10,000 people in the room will put up their hand. The few who initially don't raise their hand will eventually do out of sheer pressure of the rest beside them.
In reality, of course everybody wants to be successful. Who would want to be a failure in life right? We are conditioned in our minds that success is the target of our life.
What if I tell you that your success is not your success? What do you mean by that?
Remember when we started here, we said everybody wants to be successful? So success is firstly for everybody. And your success is actually how many people's life you enrich and not yours.
Lets put it this way. Steve Jobs founded Apple and today many people use and love his products because their life is made easy with a nice functioning phone or computer. So Steve Jobs enriched the life of others and in return he became successful.
So in your pursuit of success, first think of how many people you want to help achieve success or fulfill their life first and when they do, yours will follow. Success is about being fulfilled in life as a person and not about acquiring things. When you truly understand this you will grow to reach your full potential and will help many others along your journey in life.
MARKET UPDATE
SPX - Are we in the clear?
SPX went on a 3 day up streak and finally breached the 50 EMA mark to breach the previous high of 4465 during end September.
However, if you look at the price action, it still looks as if it is still sitting on the high side of a sideway pattern which started in End of September. It would be crucial if the trend can continue to breakout above the previous high and then go higher beyond the 4465 level.
The next threshold to break after this is 4546. The earnings season has also started and this may well be a catalyst for the market to go higher. The major banks has already made better than forecast results which is a good start to create a more positive market sentiment.
NDX
NDX closed Friday at 15147 above the EMA50 with a bullish pinbar. The trend for all markets, including DOW are more bullish this week compared to to last week.
The movement in FAANG has been mixed last week. Amazon (AMZN) closed strong last Friday with a 109 points (3.3%) up. Midweek, Apple (AAPL) tried to do a bear trap for traders after market used the news that Apple was facing chip shortages and will not be able to produce enough products for the market. It sold down slightly above $2 before only closing down by 0.60 for the day and the following days it went up 3.93! As a contrarian trader we entered a bullish trade during the selldown and rode on the run up the next days. AAPL is going to make some kind of product announcement on 18th and 28th is the earnings announcement.
On the China side, last week was a slow week in the Hong Kong market as some days the stock market was closed due to Typhoon and then a day of public holiday. Anyway, on Friday, HSI closed with a bullish pinbar once again just like the previous week.
The signs of HSI bottoming out of the downtrend is there. Once it breaches past the 50EMA next week people will be pouring into back to the market.
We are bullish of the market and has already in advance put in Options position on KWEB ETF which is a diversified proxy of the China Tech Sector which has plummeted more than 40-50% over the past few months.
CSP PORTFOLIO PERFORMANCE (UP 23.4%YTD)
(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)
6% up in one week! How did we do it? As said in last week's newsletter, the Framework we use will snap back to the average target if implemented correctly. So don't be worried if you see the portfolio returns go down during certain months. Just continue to collect premiums at our target because that is cash flows and we will use time to lock in these cash flows at the end of each monthly expiry cycle.
Use the W.A.R. strategy to your advantage. Having a Watchlist, Activation Level and Repeat will make things easy and mechanical for you monthly with less time spent.
One of the stocks in our Watchlist is the KWEB ETF. KWEB is the China Tech Stocks ADR ETF. As you know all the China Tech ADRs has taken a deep dive of 40-50% over the last month. KWEB as a proxy to these Tech Stocks like BABA, Meituan, Tencent, NTES, JD.com, BIDU, PDD, BILI... has gone down by 55%.
We took opportunity to load positions during the downturn even starting from 57 all the way to the lowest around 50 the current price level. Premium was quite good even if it was ITM, we still can get 2% per month and one strike ATM, we can get close to 2.8% premium for one week! As prices is going up, the decay of the premium is quite fast and we can enter higher Delta positions to collect more premium in anticipation of an upswing. The IV Rank is running at 60%+ and IV above 40, hence premiums are rich. We will monitor the price action and with each retracement, try to put in higher Detla trades on weekly basis. If we can do 2% a week, that's going to be 8% a month on capital invested. Please remember to diversify a bit in case China stocks make another u-turn like it did a few rounds back.
On Tuesday last week we entered a 4 days ATM trade for 1.8%, which expired worthless by end of the week. The last trade entered was on Thursday at strike 50 for $1.40 premium, 2.8% returns for 8 days expiry 22 October.
The assigned stocks for positions like Tencent (0700) and Yum China (YUMC) also improved the portfolio significantly. In addition, the Calls we are selling on YUMC also continued to generate income on the capital stucked in the assigned stock. One important thing we mentioned in our Framework is the ability to generate income whichever outcome the positions results in. Expired Worthless and also if we were assigned the stock.
11 position out of 12 expired worthless for the 15 October monthly expiry. Two position on EWZ & SKLZ we rolled forward as a trade repair but with some additional premium collected.
CYCLE TRADING
Just like how most people work monthly to get a salary at the end of the month, we traders would also want to get paid on monthly basis especially if we are working on income strategies like the Income Generations Secrets Framework.
We tend to favour selling puts using monthly options, ie Options expiring at the 3rd week of the month. For example, October 15, November 19, December 17 are all monthly expiry options.
You can start to trade them starting from 45 days before the next cycle and up to 30 days is also fine.
Monthly expiring options tend to be more liquid and liquidity means tighter spreads. Besides that, monthly options may also provide more common strike prices and in case you need to roll them forward, most likely the same rolling prices will be available in the following months options strikes.
Notwithstanding this, it does not mean we cannot trade using weekly expiry. It only means most of our trades will be done using the monthly expiry. We may still have weekly expiry trades for various reasons, eg. rolling for trade repairs or the weekly premium is much better than monthly premiums or the price action of stocks just gave us opportunities to trade weeklies.
If you see in the previous Portfolio Performance section, bulk of our expiry sits on monthly expiry period. When we do cycle trading we are technically moving from one expiry cycle to another creating once again a mechanical structured trading routine for us. Trading routines makes it easy for us to trade and also achieve consistency.
Go try out trading your income portfolio from month to month cycles and you will start to realise how structured and easy trading can be done.
FREE iPhone 13 Challenge
It has been around three weeks since we started our iP 13 challenge. The profit performance is quite encouraging with the first trade already at 65% (last week 53%) profit level while Trade 2 is catching up at 60% (last week 34%) and Trade 3 is up 40% just 3 days in.
Trade 1 - refer last weeks Newsletter
Trade 2 - refer last weeks Newsletter
Trade 3 - Bull Call Spread + Bull Put Spread (financing/insurance)
This is a double bullish trade with some form of financing/insurance in case the direction is wrong or not up fast enough.
We break down the trade into segments to explain the rational of each Option structure.
#1 Single Call - We need to pay for this and most expensive but profit is unlimited. Directionally we need to be correct and correct fast enough as otherwise the option value will decay very fast.
#2 As we do not expect prices to shoot to the moon and we are doing a short term trade, there is no real reason why we should pay for a full price of this call which blocks a lot of our buying power. To reduce the price of the call, we sacrifice a bit by capping the profit to a price target where we expect the stock to go by selling a call at strike price higher than the call you bought. You will get paid for selling of the call and hence reducing the net price of the long position. The trade now becomes a vertical spread or Bull Call Spread.
#3 If we are doing debit trades like the Bull Call Spread, we have to be directionally correct to WIN. As prices can go up or down, this uncertainty will result in a maximum 50-50% chance of winning. So what we can do to reduce the entry price is to finance it with a credit trade. In our case, a Bull Put Spread, a credit vertical spread comprising selling a put below the current market price and buying a further OTM put below the short put. eg. Selling Put Strike 133 and Buying Put Strike 130. The credit received will reduce the net price of the earlier Bull Call Spread (financing) and at same time acts as an insurance as long as the stock price is above the short put on expiry, the Bull Put Spread will be a winning trade while the Bull Call Spread may be a losing trade if stock price drops after entry.
Anyway, we will tend to manage or exit the trade earlier at breakeven or minimal losses in case directionally we are not right after trade execution. If we do only a Bull Call Spread and wrong in direction, we will lose more without this financing/insurance trade combination.
Refer the trade video for more info on trade structuring.
For those who have not registered for the iPhone 13 Challenge, the registration link is here [Register Here]. We will share the trade entries when we do a trade and also explain in detail the executed strategy in a video at the Challenge Members Area.
TRADERS TALK
Did you hear last week's Traders Talk?
I was speaking on why you should not invest in property but instead learn how to buy property. Is there a difference, yes for sure!!! Listen to Traders Talk Series 18 if you have not done so. 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.
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