July Update: 25th July Trade
As of last week, I am long 500 shares of SPLK 0.00%↑ from a short put with an average of $106 per share.
As of today, I have sold 5x covered calls with an average of $106 for a limit of $1.33 average.
Net credit: $665USD
Expiry: 28/7, this Friday.
Net 1 week return: 1.25% on the original $53,000USD used to buy the shares.
Far OTM puts can be bought against my position. EG; the 4th august 91 strike can be bought for $4 per contract with $0.04 limit. 5 options would cost me a measly $20. But I would be accepting a “sale” at $91 per share vs the $106 I paid. It insures my downside should I choose to use it but it also hurts my upside.
I choose not to hedge because I would rather hold the shares for the long run and if called, I can still benefit from selling puts in its wake as it climbs. Nothing really stops me either way.
On the other hand, if markets work against, me, selling covered calls helps me (w my salary) buy incremental positions against a business whose value is growing by the day with the market devaluation.
As an aside, earning an extra $3-4000SGD a month in non-taxable income really doesn’t hurt. Sure, my position is underwater.
But if holding META 0.00%↑ through $220, then $190, then $170, then $150, then $120s, then into $88, and incrementally buying up shares at every drop (esp that last bit!) taught me anything, its that the triump of being right, the sweetness of watching that reversal come about, the knowledge that you held firm and made the right calls, that feeling?
It’s fucking unbeatable.
Have the courage of your convictions, and earn the wisdom of your mistakes.
Not financial advise. DYODD.