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May P/L Challenge: Buy the dip or keep watching during the bear market?
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doctorpot1 joined discussion · May 31, 2022 12:29

Bear rally happen and buying the dip using PUT options didn't work well 😭😭

TLDR: Market rallied sooner that I thought, and had missed out on more gains, as I was selling PUT options instead of buying the shares when it dipped But well, no one can time the market so gains is still gains
4 learning points at the end of the post too
Story time
In the first half of May, the market is red and it entered into bear territory. Panic selling everywhere, which means that you can get stock for a huge discount. So all the stocks that I own and have conviction in, is going for cheap. Actually is more like cheap got even cheaper as the stocks I buy are those that crashed 70% already Why did I choose those stocks that crashed, because value investing that's why
Thus, I tried adding more positions on all the companies that I have faith in. However, I sold PUT options to try and buy the shares instead of buying the dip outright as I thought the price will keep dropping given the crazy environment. However the bear rally happened and there seems to be no hope for the PUT options to get exercised
Bear rally happen and buying the dip using PUT options didn't work well 😭😭
The reason why I choose to use PUT options to buy into position is because I already know what is the price I'm willing to buy the shares at no matter what, so why not collect extra money from the premiums instead? I mean why say no to free money right?
But the down side is if the market suddenly rallies, then I probably won't get the shares
In May, I have sold more PUT option to try and increase my position in $NIO Inc (NIO.US)$, $Futu Holdings Ltd (FUTU.US)$, $Palantir (PLTR.US)$ and $Grab Holdings (GRAB.US)$. Looking at the trend now, I doubt I will get any shares
but the silver lining is I actually bought 400 shares of GRAB at $2.52 each to test the "one word prophecy" hypothesis, which is an interesting phenomenon where GRAB seems to rally whenever the one word guy appears. So I tested it as mentioned in this post here:
doctorpot1: one word appeared so I just had to buy, 400 shares plus 400 more
So what did I learn in May?
1. Ensure that there is sufficient cash in the war chest during bear market so that I can buy the dip.
2. When market crash, buy the dip on companies that I have done extensive research on and have conviction in.
3. Maybe don't buy the dip using 100% PUT options. Split it 50:50, so buy the shares as well as selling PUT option instead.
4. In a bear market try not to all in at one go when there is a dip, spread it out over a few months, as no one knows how long the bear market will last.
Bear rally happen and buying the dip using PUT options didn't work well 😭😭
Bear rally happen and buying the dip using PUT options didn't work well 😭😭
Bear rally happen and buying the dip using PUT options didn't work well 😭😭
Bear rally happen and buying the dip using PUT options didn't work well 😭😭
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  • ETYK :

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  • ETYK : a profit is still a profit. At least u are not losing $

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  • doctorpot1 OP ETYK : true true [undefined][undefined] no one can time the market so green is good [undefined][undefined]

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  • PlutoMoo102685100 : You do know that you can sell in the money put option a and if the stock rally you can just buy back the put option and earn the option premium right?

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  • doctorpot1 OP PlutoMoo102685100 : yup yup [undefined] I sold OTM instead of ITM, as I wanted to buy in cheaper thinking that the bear will continue for much longer [undefined][undefined] But still earned the premiums either way [undefined][undefined]

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  • ChicoRF : Isn’t buying the dip not always as lucrative as one thinks if they know the position of a company may not always bounce back as they expect, my biggest thing when buying the dip sometimes is not investing in knowing which company will outperform later and some just keep falling and you put a lot in early, maybe it’s safer to buy in towards the end of a dip or mid when you know that market will go back up but than again this market has been so volatile due to all these bad events going on with our country and the rest of the world.

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  • doctorpot1 OP ChicoRF : The issue is no one know when is the end or mid of the dip, especially during this time [undefined][undefined] we are seeing a bear rally now, but the next moment market could tank again if the war escalate or recession is confirmed. If the war suddenly ends, the market would rally hard and no one can buy in fast enough as well.

    So instead of trying to time the market, another way is to keep buying in across a long period of time, provided that the price is an attractive price [undefined][undefined]

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  • Conn_00 : Hi, I'm newbie to learn option, may I know that:

    1) If I hv 100 units shares A in my account, can I still "sell put option" for shares A with lower strike price?

    2) If I don't hv shares B & can I proceed to "sell put option"?

    3) What's the different between the above 2 scenario? How about the charges fees for above 2 scenario? Anything I need to take note for above 2 scenario of sell put option?

    Thank you :)

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  • doctorpot1 OP Conn_00 : selling a PUT option just means that you could be forced to buy the shares at the strike price on or before the expiry date. So you can sell PUT for both scenarios to lower your cost but you need to know you could be forced to buy 100 shares at the strike price. So only sell PUT option if you really don't mind buying the shares at a given price.

    for scenario 1, if you have 100 shares, you could sell a CALL option to lower your cost too. this is known as a covered call. however selling a CALL option means that you could be forced to sell your 100 shares away at the strike price on or before the expiry date. so you can sell the CALL option at a price that you don't mind selling your shares for. I have been selling a lot of CALL options for shares that I own at a price that I dont mind selling it for. e.g. I sold a number of $Grab Holdings (GRAB.US)$ CALL option with strike price at 6, 7 and 7.50.

    if you own 100 shares of a company A. you could even sell both PUT and CALL to lower your cost basis even faster. You just need to make sure the strike price is set appropriately, within your risk tolerance, and properly researched [undefined][undefined]

    as for the fees it is the same for selling or buying any options. the fees is 0.65 a contract and there is the commission and platform fees too.  https://www.futusg.com/en/fee/options/options-us

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  • doctorpot1 OP Conn_00 : If you are new here are links to learn more, before trying out options, you should understand it fully before using it because options are leveraged products and are more complex, so if used wrongly it can cause you to lose a lot of money. Here are some links for you to start learning about options:
    https://youtu.be/VJgHkAqohbU

    https://youtu.be/8YVuvI9VLqw

    https://youtu.be/l9ta2nLXoao

    https://live.moomoo.com/course/1302?source=share&nn_page_type=course_catalog&source=share&lang=en-us&data_ticket=5b3500b278c1b7aa4a176e85285988a1

    Some "safer" strategies
    WHEEL: https://youtu.be/M6MqKI2uMIE

    LEAPS: https://youtu.be/95suqaJcFtU

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doctorpot1
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