First half of 2024 is all about rolling option on great trade

The key to my portfolio's success lies in the exceptional performance of certain stocks from China, the US, and Southeast Asia. After three years of relentless downturns, the long-anticipated rally in the Chinese market finally arrived, akin to a phoenix rising from the ashes . Witnessing this resurgence has made a significant impact on my portfolio.

As I reflect on these past six months, I'm filled with cautious optimism for what lies ahead. The resilience and resurgence of these markets have been a testament to the enduring potential of strategic, diversified investing. Let's dive deeper into the details and lessons learned from this dynamic period in my financial journey.

Among these new additions, Nio has been the most challenging. As you can see from the chart below, the dip just keeps dipping!

While buying the dip is a familiar strategy that has often worked out well for me, it's important to remember that it's not without risks.

For instance, buying the dip on Palantir transformed a 70% drawdown into a remarkable 116% profit, showcasing the potential rewards of this approach. With Nio, I remain hopeful that it will eventually mirror Palantir's turnaround. The company's innovative battery swap technology holds significant promise, and I'm optimistic that it will drive future success .

As we continue through 2024, I'll keep a close eye on Nio and other key holdings, ready to adjust my strategy as market conditions evolve. This early-year activity has reinforced the importance of staying agile and informed, allowing me to capitalize on opportunities and navigate challenges with confidence.

At the start of the year, I saw an opportunity in Bilibili, which had plummeted 90% from its all-time high. After three years of decline, this massive dip signaled to me a potentially great bet on the resurgence in Chinese tech stocks.

However, rather than committing a large sum to buy shares outright, an approach that could be risky if the stock continued to fall, I opted for a more cautious strategy. I invested in LEAPS CALL options with nearly two years until expiration. This approach allowed me to place a smaller amount of capital at risk while still positioning myself to benefit from any upside. If Bilibili's stock were to drop further, my losses would be more contained compared to owning the shares directly. Conversely, if the stock surged, I could buy at $10 per share, capitalizing on the recovery.

To further mitigate risk and generate income, I employed a "Poor Man's Covered Call" strategy. By selling shorter-term call options against my LEAPS CALL, I collected premium income and reduced my cost basis, while still maintaining potential upside. This strategy allows me to manage risk with a lower-cost alternative to owning the stock and leverage the long-term options for any potential gains.

Another notable trade occurred in late January when I purchased SEA shares at $35.95 each, just before their unexpected surge. Anticipating a neutral short-term outlook, I initially sold a covered call with a $40 strike price to lower my cost basis and protect against potential declines.

However, SEA's stock price began a remarkable bull run, prompting me to roll the covered call strike price higher multiple times. I first adjusted it from $40 to $46, then to $48, and eventually to $50.

This rolling strategy, where I adjust the strike price higher as the stock appreciates, has proven beneficial. It enables me to capture more potential gains while extending the expiration date to continue collecting premiums . However, as the stock price rises, the profit from rolling the covered call diminishes. Initially, rolling the strike price from $40 to $46 earned me $15 in premium and $1,800 in intrinsic value, resulting in a profit of $907.50 per month. As I rolled the strike price to $48, the profit decreased to $367.50 per month, and rolling to $50 further reduced it to $135 per month .

Despite the decreasing profitability of rolling deeper ITM calls on an uptrending stock, I remain committed to this strategy. My goal is to continue rolling the call up to a strike price of $66. While this will require patience, the incremental gains and time value captured with each roll add a rewarding layer to my investment strategy.

Overall, these trades and adjustments reflect my dynamic approach to navigating the market, leveraging options for income and protection, and adapting strategies to capitalize on evolving opportunities.

When the Chinese tech stock recovery kicked in, it was both unexpected and swift.

To manage this situation, I opted to purchase additional shares below $50 to cover the covered CALL option. This strategy ensured that if my FUTU shares were called away, I'd still retain my initial position while gaining extra profits from the newly acquired shares.

Part of my recovery strategy involved leveraging stock cash coupons from Moo Moo's Lucky Spin. By using 500 points to spin a lucky wheel five times, we are guaranteed a minimum 2 SGD stock cash coupon and a "refund" of 100 points. If luck was on my side, I might even snag an Apple share .

Since we're buying shares anyway, leveraging on the lucky spin, offers a great return on points of at least 2 SGD per 400 points. After accumulating ten 2 SGD stock cash coupons, I embarked on a buying spree, adding 20 SGD and 200 more FUTU shares to my coffers.

Even with these extra shares, I did not just let them get called away. Instead, I rolled my covered CALL option to extract maximum value. Initially, rolling the strike price from $50 to $60 netted me $30 in premium and $2,000 in intrinsic value, resulting in a profit of $676.67 per month. As I rolled the strike price up to $65, the profit decreased to $193.33 per month, but I continued to milk every last drop from the covered CALL strategy .

Google faced a similar fate as SEA, with profits from rolling covered CALL options diminishing as the stock price rose. Initially, rolling the strike price from $125 to $130 earned me $10 in premium and $500 in intrinsic value, resulting in a profit of $127.50 per month. When I rolled the strike price to $135, the profit decreased to $82.14 per month.

The first half of 2024 has been an exhilarating ride, filled with strategic moves, unexpected market surges, and the constant need to adapt. From exercising LEAPS CALL options to rolling covered calls, each decision has underscored the importance of agility and foresight in investing.

Navigating the volatile landscape of Chinese tech stocks, capitalizing on the resurgence of the US market, and leveraging options strategies to maximize returns have been central to my journey. These experiences highlight a crucial lesson: staying informed and flexible is key to thriving in ever-changing markets .

One clear takeaway from the first half of 2024 is that in a bull market, covered call strategies can be risky. Rapidly rising stock prices make it challenging to roll options effectively, potentially capping gains and requiring frequent adjustments to avoid having the stock called away. While these adjustments can still yield profits, the returns tend to diminish with each subsequent roll, emphasizing the need for careful planning and adaptability in a dynamic market environment.

As we look ahead to the second half of 2024, I encourage you to reflect on your own investment strategies. Are you prepared to adapt to sudden market shifts? Are you leveraging all available tools to manage risk and maximize returns? Whether you're a seasoned investor or just starting, there's always room to refine your approach.

Join me in embracing the journey with a blend of caution and optimism. Continue learning, stay agile, and remember that every market twist and turn offers an opportunity to grow and succeed. Let’s navigate the rest of 2024 with confidence and a strategic mindset, ready to seize the opportunities that come our way .

Here's to smart investing and prosperous days ahead. Happy trading!