To The Moon

Dear Tigers

This week, we've interviewed a mysterious user from Tiger Community who had a stoning high winning rate of 91.18% from 839 traded stocks.

According to Ray‘s screenshot , he has traded 834 stocks on the Tiger Trade, and the transaction winning rate is 91.73%.

One of its recent large holdings is $Li Auto(LI)$ , whose position percentage is greater than 10%, a relatively large position for Ray personally.

Screenshot from Ray

Ray currently made a profit close to $500,000, and the P&L ratio is 75.86%, as of June 14, 2023.

• Do you have an interest in how Ray made such a high winning rate?

• Can his trading strategies for such great performances be duplicated?

• Any special strategies can be learned by Tigers?

In today's Tiger Club, we are honored to have Ray's sharing on his way to succeeding in trading and also his current profit holdings.

Ray's introduction:

Majored in the Non-Finance area, Ray started a great interest in stock trading when he was in college and now he has over 10 years of experience in trading HK stocks and US equities. Also at college time, he read investing books from legend investors Warren Buffet and Benjamin Graham, which built up his philosophy of never buying one stock at a time and with all the money.

As of the post, Ray is holding $Li Auto(LI)$ with a profit at 75%, and he said he had made a 20 times profit from trading $Tesla Motors(TSLA)$ .

Below are the summarized interview and key strategies that Ray wants to share with the Tigers.

1. Ray uses the SELL PUT strategy very often for the stocks he sticky invests in

In the interview, Ray said:

"I mainly Sell put, which brought me a high winning rate, because Sell put itself has a relatively high fault tolerance rate. Usually, I bought and hold for a long time with stocks that I’m familiar with fundamentals and also have confidence in their future values. At the same time, I sell put to protect or hedge my holdings.

When the stock price fell, but was still under my expected lower price, I'm happy to strike the option to buy the stocks. If the price didn't go low to my PUT price, it is fine that I can gain some Put option premium as well. In the long run, the return of options even exceeds the return of underlying stocks.

What's more, I make clear discipline to control risks by never letting the position of one single stock exceed 10%. As I frequently engage in trading, there are also occasions when leverage (financing) comes into play. I will control my leverage ratio within 5%. But most of the time, there is no leverage in my account.”

2. Ray's buy and sell decisions, options strategies, fundamental research tools, and risk control in $Li Auto(LI)$

Screenshot from Ray

Ray shared in his interview:

"I trade EV stocks often, such as $Tesla Motors(TSLA)$ and $Li Auto(LI)$ . However, the core of successful investment actually is you have your own judgment and enough research on the fundamentals of the underlying stocks in order not to be afraid of fluctuations.

Taking my holdings of Chinese energy vehicle company $Li Auto(LI)$ as an example, I very much approve of the $Li Auto(LI)$ company's products, management, even holding the shares when the underlying shares were at a floating loss of 30%. In 2020, $Li Auto(LI)$ 's price fell to around $15~$16, its market value was cheap to about $15 billion at that time, and the market’s confidence was very low.

However, I followed up the company's data and found that the sales of its entire L-series cars were very good.LI's market demand was still huge, and orders were growing rapidly.

Therefore, even $Li Auto(LI)$ fell a lot, I was still willing to buy. And I used the sell put option strategy to set a discounted strike price of 15%~20%. When the option is exercised, I was ready to buy the stocks. When it rise later, and my premium return also seems good. To be added that, my position in LI takes 10% of my investments, which is a heavy position for me. ”

Screenshot from Ray

Ray said that because he did spend time and effort to do research of the companies and also did valuation estimate & calculation, so he was optimistic about his strategic plan.Even if the stock falls, he will not rush to sell the stock. As for the strike price of Sell put, Ray said,

"I mainly set the strike price based on the valuation and its fundamentals. For example, when the LI price is around $20, and I would set a price at $15~$18.

For now, $Li Auto(LI)$ 's price is above $33, then i would set around $20~$25, or around $20 in the future. At the same time, because the price of the long-term put is relatively low, I will allocate a larger amount of sell put. Suppose I sell the short-term put, the price is relatively high, and I would plan a smaller amount. My goal is buy a good company at a better price and sell it at a better price always."

So far, it is not difficult to see that Ray is very good at options trading. Options trading has a leverage function along with a greater trading risk. Ray views options more like a strategic tool, but not a gamble.

"Options is a tool for me. The trading scenario and actual behavior are also affected by many factors. In fact, investment masters like Warren Buffett is also a big option player. Essentially, when they buy $Apple(AAPL)$ and $Occidental(OXY)$ , he did use options as a strategic tool.

Going back to my LI, the reason why i keep confidence buying back under low price is I have a certain understanding of the LI fundamentals, and I did use a larger amount of options. "

Ray also encourages Tigers to conduct in-depth research on their your holding companies, understand the macro, find good companies and grasp the good price. Regarding how can ordinary investors do to improve their understanding of a company?

Ray shared some real but also interesting experiences of his own:

"I did read all the external articles and blogs of the company's management team, I tried to feel the company and the management's philosophy of the world and its business operations. I also tracked the company's sales data and new products etc from public information and investigation by on my own.

For example, I follow the company's delivery volume, order volume and other information by communication with companies sales, I do purchase a EV car from LI and became a user to experience its products in person, and join some customers groups or shareholders groups to collect information.

All these real participation complete the information puzzle of $Li Auto(LI)$ . Of course, I didn't blindly deceiving myself, when there is some negative news or events, I did analyze whether it will affect the company's fundamentals or not. That's a lot of work though.

So, when $Li Auto(LI)$ fell to $12 in 2023 and caused panic among investors, my stocks were experiencing a floating loss of over 30%, but I remained calm. Firstly, because I strongly believe in its value, and I am willing to hold onto these stocks for the long term. Secondly, I sell put when the premium is high and then buy stocks at a lower price point. In the end, although my holdings in $Li Auto(LI)$ stocks yielded approximately 75%, the options yielded even higher returns.”

Of course, Ray has also made some mistakes and learned some lessons in his past trading history. Ray said frankly that human nature is difficult to escape, he also made mistakes and lost money by speculations.

“I also have some friends who, due to their high winning rate, became overconfident and changed their position risk management strategy by significantly increasing their trading volume in options. As a result, they suffered significant investment losses and found themselves in a very difficult situation.”

3. Therefore, Ray’s final suggestion to Tigers are:

• Remain true to your original goal - buy good companies with long term determination

• Set your goal to buy and sell the stock at a good price.

• Learn the philosophy of value investors such as Warren Buffet and Benjamin Graham

• Collect enough info to do comprehensive analysis. Only when you understand the company better than 99% of the people can you earn this money with peace of mind.

Final notes: The stocks and opinions mentioned in the article are only used as cases for communication, not as investment advice directly.

Welcome to leave messages for additional questions to Ray, we may follow up some communications and to give you reply.