Interesting Article I read | My Nvidia Time Bomb (-USD141.5k Unrealised Loss & Counting), Why You Should Never Sell Naked CALL, The Danger Of Short Selling

This is an interesting take from Jason as it was such a personal and yet informative piece and encapsulated the actions and emotions of investing/trading. It is a piece that the author willingly shared with the experience of making a mistake and accepting that loss.

https://learninginvestmentwithjasoncai.com/2024/03/10/my-nvidia-time-bomb-usd141-5k-unrealised-loss-counting-why-you-should-never-sell-naked-call-the-danger-of-short-selling/

It is never easy to share your losses and in the article, Jason shared how he had 300 shares of Nvidia, that is not a small amount judging by the current price. He lost them at a lower price than today due to selling covered calls, he then sold 200 shares trying to cover the loss and sold naked calls as he thought that Nvidia was in for a correction but it went up instead. Since he sold a naked call, he is short of 200 shares of Nvidia to repay as the prices of Nvidia goes higher, he would accumulate more losses.

If you read through his blog, this is definitely not the first time he is facing such a huge loss: https://learninginvestmentwithjasoncai.com/2022/06/20/if-you-are-feeling-depressed-from-losing-lots-of-money-in-the-stock-market-heres-an-article-for-you/

It is a great read as the amount is heart wrenching and serves a valuable lesson and insight to those who are starting out in options trading. I am no guru and just wanted to share this article that I read.

My options journey

I am a newbie in options and I would like it to stay that way, I mostly do covered calls and once in awhile cash secured puts, I like available cash to be invested so I haven’t done much cash secured puts but I think it is a great way to purchase shares that you want at a lower price and at the same time, earn a premium on it.

I just started covered calls in the later part of 2023 so not a long time of experience but I like that it brings in some form of premium, although some times it is not worth especially when earnings call or CPI or FOMC meetings are around the corner as the volatility can make the stock go substantially up. I keep a sufficient margin between the strike price and the current market price so far, I have hit the strike price about twice, mostly last year. But the difference of my purchase price back is not huge as I usually buy like a 20 to 30 days time period.

Overall still learning and believe that managing your emotions is important when experiencing the price going near to your strike price. You suddenly get a shot of adrenaline thinking of ways to reduce the loss and if it shoots higher, what will happen? My portfolio has increased substantially due to the premiums I am earning as I reinvest them back in, keeping it up with the covered calls until it’s too volatile then I might take a break.

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