To The Moon

Introduction

Selling put options can be an effective way to generate consistent income or acquire stocks at a discounted price. This article explores a specific strategy: selling 2-week put options on Tiger Brokers' stock (TIGR) with a strike price of $9 and a premium of $0.10, aiming for approximately 1% returns every two weeks.

Strategy Breakdown

1. Mechanics of the Trade

Underlying Stock: Tiger Brokers (TIGR).

Option Type: Short Put (Selling a Put Option).

Strike Price: $9.

Premium Received: $0.10 per share.

Expiration: 2 weeks.

Capital Requirement: Typically, brokers require collateral equal to the strike price minus the premium (e.g., $9 - $0.10 = $8.90 per share).

2. Return Calculation

roughly 1% every 2 weeks, or an annualized return of ~26%).

3. Scenario Analysis

Stock Above $9 at Expiration:The option expires worthless, and you keep the $0.10 premium as profit.

Stock Below $9 at Expiration:You are assigned the stock at $9 per share. Your effective cost basis becomes:[ $9 - $0.10 = $8.90 \text{ per share}. ] If you’re bullish on TIGR long-term, this could be an opportunity to own the stock at a discount.

Why This Strategy?

Income Generation: Consistent premiums can enhance portfolio returns.

Stock Acquisition: Potential to buy TIGR at a lower price if assigned.

Defined Risk: Maximum loss is limited to the strike price minus the premium (if the stock falls to zero).

Risks to Consider

Stock Decline: If TIGR drops significantly below $9, losses could exceed the premium received.

Assignment Risk: Be prepared to own the stock if assigned.

Opportunity Cost: Capital is tied up as collateral, limiting other investment opportunities.

How to Execute on Tiger Brokers

Account Requirements: Ensure you have sufficient collateral (cash or margin) to cover the put sale.

Order Placement:

Select TIGR as the underlying.

Choose the $9 strike price and 2-week expiration.

Enter a limit order for the $0.10 premium.

Monitor the Trade: Adjust or close the position if market conditions change.

Conclusion

Selling 2-week put options on TIGR at $9 for a $0.10 premium offers a disciplined way to target ~1% returns every two weeks. While the strategy is attractive for income seekers, it’s essential to understand the risks and ensure alignment with your investment goals.

Information is for reference only and does not constitute investment advice