Investment Reflection: Rollover of Li Auto (LI) Put Option
Overview
On July 5, 2024, I executed a rollover of my put option on Li Auto $Li Auto(LI)$
Rationale for Rollover
Li Auto has exhibited significant growth in revenue and vehicle deliveries, driven by its strategic initiatives and strong financial health. These factors provide confidence in the company's future, making it a compelling candidate for extending my option position. The decision to roll over the put option aligns with the following key observations:
Financial and Operational Strength: Li Auto's financial position is solid, allowing the company to invest in new model development and scale up production. This financial stability reduces the risk associated with holding a put option against the stock.
Market Success of L6 Model: The success of the new L6 model has demonstrated Li Auto's adeptness at understanding and meeting market demands. The strong reception of this model highlights the company's potential for continued success, thus underpinning confidence in the stock's stability.
Stock Price Support: As of July 5, 2024, Li Auto's stock price stood at USD 20.46. This price point reflects market optimism about the company’s future prospects, influenced by its recent achievements and strategic direction. Holding the put option into August provides a buffer to capitalize on potential premium decay without significant downside risk.
Strategic Considerations
The decision to roll over the put option is driven by a balanced view of the company's prospects and current market valuation. Collecting an additional premium of USD 39 per contract offers a return opportunity while managing exposure. The key considerations include:
Premium Collection: By extending the option's maturity, I am able to collect a further premium, enhancing the overall yield from this strategy. This is particularly attractive given the favorable outlook for Li Auto.
Risk Mitigation: Extending the option's maturity helps in managing the timing risk, providing more room to navigate any short-term fluctuations in the stock price, particularly as the market digests the implications of the successful L6 model and the company's future plans.
Market Positioning: The extended maturity aligns with the ongoing positive sentiment towards Li Auto. The rollover provides an opportunity to benefit from continued bullish trends while maintaining a hedged position in the form of the put option.
Conclusion
Rollover of the put option on Li Auto to August 16, 2024, aligns with the strong fundamental and operational outlook of the company. The strategic move to extend the maturity while collecting an additional premium reflects a calculated approach to benefit from the company's positive trajectory while mitigating risk. As Li Auto continues to demonstrate its market leadership and operational excellence, this position is poised to offer favorable returns while providing downside protection in a volatile market environment.
$LI CALENDAR 240816/240726 PUT 23.0/PUT 23.0$
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