To The Moon

What is the experience of floating loss of HK$10,000,000 in one stock?

@OptionS is a seasoned player in $Tesla Motors(TSLA)$ and $Pinduoduo Inc.(PDD)$ options, accumulating remarkable profits through hundreds of trades within a year.

Although with a floating loss of HK$ ten million on $TENCENT(00700)$, he eventually turned the situation around.

With over a decade of options trading experience, he holds a set of investment strategies that can cross bulls and bears!

1. Briefly introduce yourself

I'm a tech entrepreneur, previously employed in major internet companies as a programmer.

I have a keen interest in options trading and also enjoy Texas Hold'em, mystery novels, and science fiction.

2. What’s your investment style? Why do you prefer options?

I consider myself a fundamental investor.

My preference for options trading isn't because of leverage or risk appetite. It's about translating my perceptions of the future into investments.

Options can capitalize on my diversified perspectives.

• For instance, sell put $NVIDIA Corp(NVDA)$.

It is an exceptional company, but its current stock price is too high and may pull back. Therefore, going long or short on the stock directly isn't the best choice.

However, I can trade my slightly bullish view on it through selling puts, earning premiums. If the price drops to the stike price (around $300-350), I acquire the stock at a discounted rate.

• Let me provide another example of a sell covered call strategy.

I hold shares of $TENCENT(00700)$ , but it might take a long time for Tencent's stock price to rise from HK$300 to 600.

I opt to sell covered calls to gain additional premiums.

3. As one of the first users of Trade Feed, please share your experience.

I greatly enjoy this feature.

As a subscriber and sharer, seeing posts or comments from others provides inspirational thoughts and fosters personal growth.

4. Why do you choose “sell put”? What are the advantages? Could you recommend specific scenarios or stocks suitable for Sell Put?

High winning rate.

I can't precisely predict stock prices, so strategies with high tolerance suit my fundamental analysis style, especially when combined with forward P/E ratios within familiar sectors.

• Regarding suitable stocks and scenarios for Sell Put, I welcome everyone to subscribe to my order sharing. I typically share orders almost every week.

To learn more about adavantages of “sell put“, you can read Options Insights VI: The Advantages of Cash-Secured Puts

5. You often share about selling puts for $Pinduoduo Inc.(PDD)$ and $Tesla Motors(TSLA)$ . How do you choose the strike price?

Choose lchow forward P/E

When selecting the strike price, I mainly consider the company itself, unaffected by market bulls or bears.

I choosea relatively low expected P/E ratio that I'm completely comfortable with. Regardless of a company's excellence, I typically avoid choosing forward P/E of 50 or 100.

$Pinduoduo Inc.(PDD)$ was excellent because of China's current consumption downgrade combined with Temu’s development in other countries.

When Pinduoduo stock price was around $50, its forward P/E was only about 10. So, I would confidently engage in selling put options at that time.

Even today, with PDD rising to $117, its forward P/E in 2024 is about 18.67 times. That’s why Pinduoduo remains a significant target for my sell put strategies.

check the forward P/E data on Tiger Trade app

For $Tesla Motors(TSLA)$, I used to have much in my position, but currently, it’s lower than Pinduoduo's. Mainly due to Tesla's recent average sales performance in the Chinese market.

• The highest strike price I hold for Tesla is $135.

I prefer buying Tesla with a forward P/E below 30. Choosing a lower P/E ratio helps withstand potential price drops if forced to acquire shares.

Currently, Wall Street's 2024 consensus EPS for Tesla is only $3.87. If we multiply $3.87 by, let's say, a future P/E ratio of around 30, that would be approximately the exercise price I'd choose for Tesla.

For large companies like Tesla, their EPS forecasts are frequently adjusted up or down, so it's crucial to closely monitor financial forecasts.

6. What's your most successful trade? Can it be replicated? Why?

My most profitable ticker currently is $Pinduoduo Inc.(PDD)$ .

• Over the past two years, I've traded PDD about 189 times.

On single trade won’t yield much profit; it's the cumulative effect of over a hundred trades that amounted to significant gains.

The approach is similar for other assets; when one trade expires, I open another position for this ticker.

If there aren't significant changes in fundamentals or financial reports, placing orders doesn't take much time.

I believe it's replicable; I've been doing this for over a decade.

7. What's your most failed trade? What lessons did you learn?

Similar to the previous question, it's not about a specific trade but a particular ticker.

Currently, I loses most on $NIO Inc.(NIO)$ .

Despite using sell covered call strategies to offset costs, I'm still at a loss due to the high strike price.

I've learned two things.

From individual stocks to indices. $Invesco QQQ Trust-ETF(QQQ)$ is an index I've tarded frequently.

Stay away from loss-making companies like NIO.

8. How do you persist when market volatility affects your confidence?

Let me share a rather unfortunate experience with $TENCENT(00700)$.

Tencent dropped from over HK$700 to around 180. During Tencent's decline, I purchased shares at HK$200 - 300. Subsequently, it continued dropping to around 180.

At the lowest point of Tencent, I had float loss of approximately HK$10,000,000.

Fortunately, it later rose back to around 400, and I sold.

Thus, selecting the right company is crucial. If you choose the wrong company, there might be no chance for a recovery; choose the right one, and there's hope for a rebound.

9. Any advice for newcomers of options?

• Focus on selling more than buying.

Buyers face time decay, while sellers have time on their side. Buying options demands higher cognitive and temporal accuracy.

• Calculate carefully the margin and funds

As an options seller, you need to clarify how much money you need to acquire the stock if falling below the strike price.

Conduct both quantitative and qualitative fundamental analyses, making valuation judgments.

• Manage risk.

Often, investment decisions don't just assess a company but also test human emotions like greed and fear. It's also about refining your mindset. Establish your investment system.

10. What would you like to tell your followers?

It's a pleasure to connect with everyone in the Tiger Community; welcome to exchange investment clues and opportunities. Thank you all!