Selling Covered Calls for 2 months | What I have learned and mistakes done

I have been doing some covered calls since July and it’s been a learning experience as I earn some side cash on the side and maybe also some losses? There have been times when I did things in a rush and it ended up with me having to lose some profit which I will share more. In the end, if I did not panic, it would have turned out fine.

Selling covered calls on………

TSLA and PLTR. Most of the premiums are from TSLA since it is a volatile stock and it is a popular stock for options since the premiums are rather huge compared to others. PLTR is a smaller value as I don’t hold as much of it as compared to TSLA. 100 shares of TSLA is very different in absolute value against 100 shares of PLTR.

Panicked when the market price came close to the strike price, rolled it at a loss and bought eventually bought it back at a loss as well

I started selling covered calls in mid July and it was great in the beginning as the market was a sideways market for TSLA and PLTR, it was a slightly downward market meaning that selling covered calls were good as price got lower, I can readjust it and earn more premium as the market price got lower.

On 21 August 2023, Tesla experienced a jump up in prices and it did scare me as I saw it go substantially nearer to my strike price. My strike price was about $10 in difference from the original market price but as Tesla shares are exceptionally volatile, the market price went up.

I panicked and rolled it up towards another week with a slightly higher strike price but I realised that I should have not as now I will need to wait another week for it to expire and with the price rising at a rapid pace, it might zoom past my strike price even before the week comes.

I then proceeded to buy back the covered call and recorded a loss. Eventually, I realised that I should have just left it to expire because even though the market price was near the strike price because it eventually did not hit it and even if it did and someone took over my shares, I could have sold a cash secured put for it. I learned through that and I think there will be many more lessons but it was a great learning point.

Lost my shares

As Morgan Stanley released a report on Tesla’s Dojo Supercomputer on a Sunday, 10 Sep 2023, the stock soared in the week of 11 Sep 2023. I had a covered call with a strike price of $267.5 which was exercised and currently, as of 16 Sep 2023, Tesla is at $274 after market.

I shall see on Monday how the shares are and sell a cash secured put. Selling a cash secured put means that I can choose a price that I would like to buy 100 shares at with a premium received but the buyer will be the one who has to exercise it for me to be able to get the 100 shares at my strike price.

I checked with chatGPT and got the following response since it will be my first time selling a cash secured put, “If you have sold a cash-secured put option (also known as writing a put), you do not have the right to exercise it. Instead, the buyer of the put option has the right to exercise it if they choose to do so. As the seller, your obligation is to buy the underlying asset at the strike price if the buyer decides to exercise the option. You are at the mercy of the buyer's decision, and you must fulfill this obligation if exercised, but you cannot initiate the exercise yourself.” I will maybe update on this if I have the time.

More to come

It’s been a period of learning and I kinda get it but of course with TSLA being a very very volatile stock/company, anything can happen within the span of a week. It’s been interesting and I will continue to learn and share updates on it.

I read up a lot before embarking on this but I realised that the best way to learn is to experience it and you will get a better gauge of it. Exciting journey and I will keep exploring and learn.

Taiwan’s low wage university graduates

I came across this documentary on Taiwan youths by CNA. It explores the low wage situation in Taiwan for fresh graduates as 54% of their youth (aged 25-34) have university degrees hence tougher competition and coupled with declining growth in the country, SMEs (small, medium enterprise) are not willing to pay more as there is an oversupply of labour that can be taken.

Many of the individuals interviewed worked multiple jobs with some being part-time or full-time. To add to the tough situation of low wage, many of them come from other cities to work in Taipei and need to pay for rent which is a huge recurring cost. Rent takes up a huge proportion of their salary hence resulting in them not being able to save money at the end of the month.

The Taiwan's Ministry of Labor (MOL) unveiled the average starting salary at between NT$24,000 (US$808) and NT$47,000 (US$1,245) for working-age graduates in 2021.

Very privileged to be born in Singapore

Opportunities and circumstances are better in Singapore than Taiwan although a much higher cost of living is coupled with that. For starters, most of us would not need to rent a place as we stay with our parents and do not need to move inter-cities to work because Singapore is a city state. At most, you will need to go to Tuas for work while staying at Pasir Ris. Of course, that is provided your parents have a property that you do not need to help pay for or that you are able to live with them, renting in Singapore is expensive and has balloon over the past year. So it depends on your circumstances but for the majority, we would be able to live with our parents.

Based on this article released in 2021 about Singapore, 33% of residents above 25 years of age has obtained a university degree in 2020. A smaller proportion compared to Taiwan (54%) but as most Singaporeans get older, they do see a larger population getting a degree.

Having more opportunities to explore, it can create a world of difference. We have MNCs here and various associate graduate programs and scholarships, even if you do not choose either of the 2, I would say that there are jobs available although fresh graduates would have to really work hard on first building that experience through internships or have good interview skills to get that first job.

Hardwork

The girt of Taiwanese can be seen in the video, this is what I see through the lens of the few individuals featured and also the female professor who said that without the language barrier, the diligence of Taiwanese and their education would definitely make them attractive to employ.

The resilience seen in the youths are strong and they are working hard for a better life even if the odds are against them. Many take on a second job and harbour the hopes of making their dreams come true. It’s interesting to see how the youths in other countries are surviving and that in a way we all do face similar yet different situations.

AI revolution

With the earnings of Google and Microsoft out, we can see a huge focus towards AI. Even during my company meetings, many also voiced out feedback and opinions on AI and how will it affect our day to day operations whether will it help us or eventually displace us. It is after all an unpredictable future ahead.

A businessinsider article mentioned that Meta, Alphabet, Microsoft and Amazon mentioned "AI" 168 times in their earnings calls last week. We can see the importance of AI and how the various key figures know that this can increase productivity which could very well mean that manpower will be reduced.

AI engineers are very much in demand, even knowing how to use ChatGPT is a huge plus point if you are looking for a new job because the employer knows how much time it can save you if it can be a partner in your work. Although some say ChatGPT is outdated considering the pace at which AI tools are being generated.

The world is changing, adaptability as well as the willingness to learn is so important. Industries are set to revolutionise and the years to come would be interesting to watch.