Singaporean Talks Money

Sunday, 6 August 2023

Trying my hand in selling options | Collected $300 in premiums so far

I was watching some videos on options and also KelvinLearnsinvesting and here, where he provides such a great simpler version and so it is much easier to understand so I decided to check out how it works. I first needed to learn how it works and so I read and watch video tutorials on covered calls and cash secured puts.

There are a lot of information online and I won’t go too deep explaining it since I might get it wrong too but for a covered call, you will need 100 shares and you are selling a call option and if the price of a stock reaches the strike price or beyond what you selected then you will need to sell your 100 shares and you will lose the difference if the stock prices goes up up and beyond your strike price where you would also get to keep the premium. If it doesn’t hit the set strike price you selected then you can keep the premium after it expires and continue selling covered calls.

For cash secured puts, you will need to prepare cash for 100 shares of whatever you are selling a put option for so in case the stock prices drops to what you set, then you will need to pay for the 100 shares and keep the premium if it doesn’t hit then, you can keep the premium and continue with your cash secured puts. I hope what I have said is correct but I have started a few transactions and so far, it’s been profit but this is in a short term market and a market that is trending downwards (due to Fitch downgrade) so covered calls so far has been great.

My experience

Palantir shares

I do have 100 shares of 2 stocks and I have started buying covered calls on them. Both are pretty volatile stocks and they are…………Palantir and Tesla but for starters, I chose Palantir as it is an easy entry into getting 100 shares but I did make a mistake where I bought a month long covered call (also cos the premium was more) and it will expire after the earnings call which is scheduled for 7 August 2023. To be honest I was aware of it but I did not know the price will fluctuate so much.

When I bought it, it was not at it’s current price, it was lower and I bought a covered call expiring on 11 August 2023 with a strike price of $21 since my cost price is about $20 (bought during the high). I collected a premium of $54 (USD) for it. This was my first covered call and I didn’t mind losing the 100 shares and wanted to familiarise in using the platform and how it will be. More of a learning experience, if I have to sell it, at least I would learn it at a lower cost.

As Palantir shares started going up in value due to the AI hype and upcoming earnings, my covered call become less valuable, I did panic a little but wasn’t really worth it to close or to roll it. I know that I could roll my position but the loss would still be there. So I am just holding onto it at the moment and see how it goes. If it sells off due to the shares hitting $21 then I will just change and sell cash secured puts on it.

Tesla shares

Tesla shares are super volatile and we can definitely see that over the years. So far, I have sold weekly options on it with premiums of about $100 per week. It has been trending sideways/downwards so I have been earning the premiums and selling it on a new week. I started from setting my strike price at $280 and for this week, I set it at $270. I am setting the strike price to be further out of the money to maximise my profits in case it hits beyond and yet a comfortable premium that is substantial. The week has ended so next week, I would see how it is and sell a new covered call.

My cost price for my Tesla shares are lower than the current price so selling it at any price would be a profit for me however we know that Tesla shares are very volatile and if a sudden good news comes up the price will shoot up so if it hits my strike price then I would have to sell the 100 shares hence limiting my upside. But I can go ahead and sell a cash secured put right after.

Weekly call options has been good and I will continue but if the market turns super bullish then I might take a pause and see how it goes. It has been an exciting journey and I have learned along the way, a lot more to be learned since I have just started about 3 weeks ago. A lot of things can only be learned on the job so getting started has been the first step to learning.

How I track my transactions

I have been using the google sheet from KelvinLearnsinvesting and it has been a great experience. I am using interactive brokers to administer the selling of options. A sideway market is great for this and I shall see how it goes, will share more on my journey. My DCA-ing into index ETFs still continues. Still very new and will just try and learn more of it for some time.

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Sunday, 30 July 2023

Stealth Wealth and Quiet Luxury

Stealth wealth is the practice of being wealthy without flaunting it. Stealth wealth individuals may drive modest cars, live in modest homes, and wear nondescript clothing. They may also choose to keep their financial status a secret from friends, family, and colleagues.

There are many reasons why someone might choose to live a stealth wealth lifestyle. Some people may do it to avoid unwanted attention from friends, family, or criminals. Others may do it to maintain a sense of humility or to avoid being seen as materialistic. Still others may do it simply because they don't see the need to show off their wealth.

Whatever the reason, stealth wealth is a growing trend. A recent study by Fidelity Investments found that 62% of wealthy Americans are now choosing to live a stealth wealth lifestyle.

Where I first heard it

I read about stealth wealth when I was reading financial samurai and it wrote about how you can stay invisible to the society. Stealth wealth is the act of being wealthy without having to show it off. In Singapore’s context, we have heard of many examples where people with booming businesses were reported to IRAS and not saying that you should not be paying your taxes but not putting yourself out there can reduce the amount of attention that you are getting and live your life peacefully.

Also, we always say that the people who are the richest are those who are wearing singlets and slippers because to them there is no need to flaunt the wealth as they already have everything they need. In a way, if you can dress in a way that elude elegance regardless of the brand that you are wearing then that is the way to go.

The purpose is not to be flashy as you attract unnecessary attention but in today’s world where attention can be monetised, I guess in a way, if you like to be loud about your wealth then go for it. With all that said, I would think that this applies to individuals of a certain wealth level because you don’t want to be evoking other’s hate.

Quiet Luxury

Quiet luxury is a style of living that emphasizes understated elegance and quality over overt displays of wealth. It is often characterized by a minimalist aesthetic, with a focus on timeless pieces that are made from high-quality materials.

Here are some of the key characteristics of quiet luxury:

Understated elegance: Quiet luxury is all about understated elegance. It is not about flashy logos or over-the-top designs. Instead, it is about choosing pieces that are simple and classic, but that still exude a sense of sophistication.
Quality materials: Quiet luxury is also about quality materials. It is important to invest in pieces that are made from high-quality materials, such as cashmere, leather, and silk. These materials will last longer and look better, even if they are more expensive.
Timeless pieces: Quiet luxury is about timeless pieces. These are pieces that will never go out of style. They are the kind of pieces that you can wear for years to come and still look stylish.
Minimalist aesthetic: Quiet luxury is often associated with a minimalist aesthetic. This means that there is a focus on simple, uncluttered lines and designs. There is no need for a lot of bells and whistles when you are trying to achieve a quiet luxury look.

Difference between Stealth Wealth and Quiet Luxury

While these two are easy to confuse, there's one fundamental difference between them. Those who practice stealth wealth dressing are truly trying to hide their affluence, while quiet luxury is just another (albeit, very understated) way to appear wealthy.

Presentation of Wealth

I saw the podcast/video on The Woke Salaryman where they talked to Christopher Tan, CEO of Providend, a fee-only wealth advisory firm in Singapore and he described the high net-worth individuals who engage them usually dress simple and do not flaunt their wealth and in a way, is an example of stealth wealth.

When I was young, I always heard that when we go Orchard Road, the really really rich people are those in their singlet and slippers although I don’t know how true that is, I believe that there is some truth in it. To me, stealth wealth is a good way to live and we can see many examples of it especially in the older generations (eg. Warren Buffett, Charlie Munger)