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$NIO Inc (NIO.US)$ just sharing my simple strategy. I choose...
$NIO Inc (NIO.US)$ just sharing my simple strategy. I choose to sell longer term Put option Jan 2027
Assume 100k free funds able to put aside for 2 years, assume leverage of 3.5 times (= 350k investable funds)
$4.00 = strike
$1.45 = interest
$2.55 = Net buying price if trigger
100 lots = 40.0k of leverage funds utilised
= divide by 3.5 = 11.4k of your initial funds
= 14.5k interest collected
Interest rate = 14.5 / 11.4 / 25 months x 12 months
= 61% per annum for 2 years
Underlying Nio price = 4.48
The number of times Nio went below $4.00 is about 8% (u can drag out historic and tabulate)
This means you have 92% of chance collecting the full interest payment of 14.5k after the option expires in Jan 2027.
Similarly you can choose other strike price with corresponding interest rate depending on where you think Nio price will be in 2 years.
But in short, the higher the interest, the lower probability you can collect the interest.
So depending on your comfort level, you chose how to allocate your funds.
If you can understand the above then there more more combinations to be used.
Investing is a calculation of probabilities, nothing is 100%.
Assume 100k free funds able to put aside for 2 years, assume leverage of 3.5 times (= 350k investable funds)
$4.00 = strike
$1.45 = interest
$2.55 = Net buying price if trigger
100 lots = 40.0k of leverage funds utilised
= divide by 3.5 = 11.4k of your initial funds
= 14.5k interest collected
Interest rate = 14.5 / 11.4 / 25 months x 12 months
= 61% per annum for 2 years
Underlying Nio price = 4.48
The number of times Nio went below $4.00 is about 8% (u can drag out historic and tabulate)
This means you have 92% of chance collecting the full interest payment of 14.5k after the option expires in Jan 2027.
Similarly you can choose other strike price with corresponding interest rate depending on where you think Nio price will be in 2 years.
But in short, the higher the interest, the lower probability you can collect the interest.
So depending on your comfort level, you chose how to allocate your funds.
If you can understand the above then there more more combinations to be used.
Investing is a calculation of probabilities, nothing is 100%.
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