This past week (26th to 30th July) made a total profit of 397 USD in Stock Options Trading.
After 30 days of Options Trading, made a total of 1435 USD in profits.
If you have yet to read my week 3 options trading article, click here to find out more. 😉
My Options Progress Week 4 out of 4
As of week 4 and the final week, it stands at a profit of 1,435 USD after 30 days of trading stock options.
This is an intermediate level investing article requiring experience in buying and selling Stock Options to digest the information which I will share below.
To reiterate the purpose of doing this 30 days challenge is to inform and educate beginner investors with less options trading experiences on what options trading could potentially be like.
There are still risks involved and proper research has to be performed for all investments including options. Be mentally prepared to cut losses when required and at the end of the day, you can suffer losses or make profits depending on your strategy and emotions.
Disclaimer: All information stated here are only for illustration and educational purposes. Its not financial advice to buy or sell any financial products. Please perform your own due diligence before investing as always.
Week 4 Progress 26th - 30th July 2021
- Each market trading day I would spent at most 3 to 4 hours doing research and monitoring the prices to buy and close the options.
- No speculating on ‘meme’ stocks. To trade in a systematic manner.
- To make it clear, the market opening hours at my side is 9.30pm to 4am (GMT +8).
- Below are the options trades that I bought and closed for the past week.
Learning Points for the past 30 days
1) Treat Options with equal importance to Stocks
- Yes I know that Options and Stocks are two different investment asset vehicles but I see them as closely related.
- When you buy stocks you are buying into the company, by owning the company's shares, you become a shareholder. In Singapore when you buy shares with your CDP account and not those 3rd party custodian brokerage account, you will become a shareholder and you can attend the annual general meetings (AGM) etc. With this in mind, how you make gains through buying shares is only when the price of that share appreciate higher than your purchased price (exclude dividend stocks).
- For Options, that is similar when you buy call options. You are buying into a particular strike price of that company. Buying Options give you the obligation to buy and not the rights to own the shares. You can exercise your rights to own the shares only if the current stock price hits or goes above your strike price ('in the money'). You will only make money if the current market price is higher than your strike price.
- However, Options have a risk which stocks do not have. That risk is Time Decay! All Options have an expiry date which you will decide when you place an order. If you choose an expiry date that is too short in duration, you might not have a sufficient time frame to allow the stock to reach your strike price before it expires worthless.
- For fundamentally good stocks if you bought them at the 'all time high', you can keep holding onto it for days, weeks or even years as long as you don't sell your stocks, you will never incur losses and if you have time on your side, you can hold and wait till the stock price eventually appreciate in value to earn that paper gain.
2) Know how to choose which company you are comfortable to invest
- This portion is the same as stocks where you will still be required to do your fundamental analysis research, find companies that fits your investing criteria and put them into a wish list.
- Always trade stocks in your wish list only.
3) Know how to read the charts and technical analysis
- This is critical as you need to be able to identify whether that particular company price is currently in an uptrend or downtrend.
- For uptrend or downtrend, this will require different Options trading strategies. If the wrong strategy is used, you will confirm lose money.
- Being able to read the price chart is a must at all cost! If you do not know how to read it and you buy/sell Options, its 100% considered as gambling your money away. Best to learn how to read basic candlesticks, how to identify price support lines and price resistance lines to aid in your entry and exit positions.
- Tradingview.com is a good website which I am using now to see price charts.
4) Understand your strengths and weaknesses to Options
- Know your trading style and habits. This is a trial and error approach.
- How much time are you willing or able to put in per day / week / month?
- Do you trade daily / weekly / monthly?
- Do you sit through the entire day's stock market from market open to market close or you only go for the first 3 hours or the last 3 hours for each trading day?
- By setting how you go about to trade then you can devise a trading pattern that works best for yourself.
- Never place an order if you have not done your research! The benefit of not doing anything outweighs the monetary loss of going into a trade unprepared.
- For me, I do not trade everyday. Only specific days of the week I will enter a trade or exit a trade. Usually I will only be active for the first 3 hours of the trading day.
5) Do not stare at the price chart daily
- From my experience, you can tell whether its a profit / loss about 50 to 60% of the time before you even place the order at the beginning. All the hard work has to be done before you make the trade as mentioned in point 1 to 4 above.
- I think this is quite important as it affects one's mental health in the long term to keep looking at numbers going up and down consistently.
- This closely ties back to point number 4 which is to devise a plan / system where you can trade Options in a way that is least time consuming to you or at a pace that you are most comfortable at to do this for the longer term at a healthy mental state of mind.
6) Learn from a mentor
- Same as any other skillsets, best to pick up options from an experienced mentor / teacher.
- Never bet and learn this solely just from YouTube or any free sites. Content creators on such sites eg. YouTube have the tendency to create content according to what works best against the YouTube Algorithm and not for the pure ‘education’ purposes. Hence, they will sacrifice and exclude key information which you’ll need to know, as they are only focused on creating specific contents that will drive more traffic to their videos and gain views.
- You can watch their videos on YouTube to get a introduction on what is Options about. However, to really go in depth to learn how to do this, its best to sign up for a course from my experience. This is to minimize paying school fees (making losses) to the stock market and have a proper system to guide you through this whole process.
7) Experience first hand 1x Bear and 1x Bull Run
- If you have yet to personally experience first hand a bear and bull market run in your lifetime, you have to start now at somewhere!
- Nothing beats getting the real exposure yourself than keep reading forums, looking at the historical price charts to study past crashes eg. Covid19 year 2020 or the real estate crash in year 2008, watching YouTube videos or hearing others’ perspective.
- Please do this first before you even make your first trade if possible.
- You have to study and understand in real life how a bear market occurs, see and assess the impact to the stock market after it caused its destruction. In the future you will come out with your own plan and strategies to try mitigate and minimize your losses. This is vice versa for the bull market and how to be less greedy at the top.
This concludes my 30 days options trading. Definitely everyone trades differently but the fundamentals still has to done before each order is placed. Hope that this opens up some insights and the possibility of how this can be used as a tool to complement stock investing.
