To The Moon

If you've read my previous post on "The Truth About Investing - What I've Learned Since Sep 2021",  you will recall that my portfolio is currently worth 25-30% of what it was valued back in late 2021 when I first started serious investing in the stock market formally.

Of course, every investor and trader will know that the dip in value of someone's portfolio currently may be attributed to rising interest rates (to tame inflation), which leads to concerns about the onset of economic recession. The peculiar thing about such a high interest rate environment is that typically good news such as a lower unemployment rate is taken negatively and the market trends downwards while typically bad news such as higher unemployment claims have the opposite effect.

To seasoned investors and traders, these volatile times represent an opportunity to make money, especially if you're one with a high risk appetite and deep pockets. What if you're a relative rookie with shallower pockets? As a mid-2023 recap, I will now share my strategy during this time of rising interest rates and economic uncertainty as the latter - options trading.

Context: 98% of my portfolio is in equities and 2% in cash. Most of my shares are in various growth companies across a few industries with minor holdings in ETFs and established (dividend) stocks. (Seasoned investors/traders can immediately see why my portfolio is down 70%). I'm not pumping any fresh funds into my account, especially when an economic recession cannot yet be discounted.

As a relative rookie, I avoid too much risk and so I only do covered calls and cash covered puts. Firstly, because I can't anticipate how things will pan out for the growth companies I'm invested in, I do DCA (dollar cost averaging) through selling cash covered puts rather than buy a stock directly. I decide which put to sell by looking at the strike price (obviously has to be below my current stock price) and the premium tied to it - I pay less attention to the expiry date (since I'm invested in the stock for a longer rather than shorter term). From the way I see it, I benefit from this method regardless of whether the option is exercised or not.

In terms of covered calls, I sell call options for stocks that I already own at a strike price that's above my cost price (obviously). Again, I also look at the premium but in this case, I pay more attention to the option expiry - I aim for those with shorter rather than longer term expiry (cos there's a higher chance of the strike price being met in the longer term, all things being equal).

So, that, in a nutshell, is the simple way that a rookie investor like me is responding to the uncertain environment at the moment. Note that this approach is comfortable for me but may not necessarily be satisfactory for others, especially if you're looking at a fast way of making money - the money that's made this way may be smaller in magnitude and take a tad longer. But the good thing about not being greedy is that I can sleep better at night.

This is just a personal sharing and not meant to be taken as professional financial advice. Please always do your own DD, including assessing your financial situation as well as financial risk appetite, before doing any form of investment. As always, I wish everyone a safe and profitable investment journey.