This week we did our first option! We sold a PUT for Newcrest Mining (NCMDR9 a unique code for every option) because I wanted to increase our exposure to gold shares without buying it. By selling 2 PUTs at 88c it means that we got $176.00 income first. How, you ask? Well an option contract is always for 100 units, so 2 x 100 = 200 shares, then 200 x 88c = $176. The other details for an option is the expiry date (17/06/2021) and the Strike Price ($28.50). What it means then is that we have sold this option to another party who wanted to be able to SELL their options or shares because they are happy to stop their loss if the price for NCM falls below $28.50. On the other hand, our strategy is to buy NCM at $28.50, if the shares fall below this on 17/6/21 then we buy at $28.50 but we also reduce our cost price by the 88c so that our cost is effectively lower at $27.62. However, if the price moves higher than $28.50, then the option lapses (i.e. expires) and we simply keep the income and can try it again. Either way, this works for us to earn a little extra. Later, we can use options to take profits on shares we hold but want to sell in a similar way to earn more again.
Note: these are very tricky because you really need to study options before doing it yourself. There are so many different ones to choose and if you choose the wrong one, or don’t have the right strategy, then it can work very badly against you.
Good news is, our portfolio is back into gains territory of 2.53% which for a month is better than cash for a year!
However, the other brokers account value is slightly different because they include the small loss on the option ($37.76) which is the difference between the option market price and the 88c that we sold. It’s not much right now and we will only know on 17/06/2021 what the outcome will be?
Our top performer is Boss Energy (BOE) which is a Uranium miner that is gaining popularity as a non fossil fuel source of power that can be produced without warming up the planet. So there’s a lot more research going into that field again – probably because they have been looking at the Chernobyl accident and how its actually recovered after 35 years!
Finally, we have seen a very volatile period for cryptocurrencies in the past week. We have continued to diversify and are almost break-even again on the $20,000 (i.e. $11,000 + $8,320 = $19,320) used for this side strategy. This is something that could easily do badly before it gets better again because there’s always more forces against them and there’s probably too many new ones issued almost daily? But that doesn’t change the trend of generally more people slowly understanding what they are or FOMO and buying them. What’s happening is that large sellers are then often able to push the price down fast, then people who borrowed money panic and sell too, until other small buyers slowly push it back up again. The saying is “up the stairs and down the escalator / elevator” and that’s just typical of most markets. Again, unless you’re a Billionaire (like Elon Musk and others) patience is a virtue!
