Oct 2023 Portfolio Review

Straits Times Index Fund, YTD returns: -1.26% (was 2.35% last month) 
S&P 500, +14% (was 15.45%)
Tracker Fund, -8% (was -7.59%) 

My portfolio, 1.4% (was 4.42%)

Portfolio dropped 3% largely due to OKP sell down from $0.22 to $0.198. Weakness in the HK market does not help, and Alibaba is still #2 in sizing of market value of the portfolio. 

Major Transactions

There were no transaction made on equities, but a handful on options. Let me say upfront that I have capital to buy all these underlying if they all get exercise. DO NOT enter into these trades because you could afford only the margin! It takes money to make money.

a) Sold/Write 6 put contracts on Tracker Funds. Each option (option sizing differs for each stock in HKEX) is 500 shares. All of them expires at the end of this month. As the market began to sell down, my put contracts at strike price of 18 is now ITM, and I expect them to get exercised if this downtrend continues.

While the amt of premiums received is a paltry 200 SGD or so, this is the same amount of money I would get if I work laboriously for food delivery.

As the OCT winds down, it is time to sell more options, as the option market in HKEX is very illiquid. You typically have to act way before the front month (which refers to the next immediate month) approaches.

b) Sold a contract of TENCENT, strike price 290, and bought a long call (expiring end June 2024) at strike price 300.

The average premium received from the put is 4.53, and the cost of buying the long call is 35.8.
There are a few ways where this Tencent trade can go:

1) the price of Tencent continues to oscillate around the 290-300 mark. 

I would continue to sell puts to help pay for the long call. I would stress that this long call would not be held all the way to expiry. I would likely sell this contract close to March to avoid the accelerating time value (theta) decay.

2) Tencent prices plunge below 290
The put options will get exercised, and I will immediately sell a call, and close the long call option.

3) Tencent prices surge beyond 300
Obviously this is the best outcome for me, since I will keep the premium from my short put and enjoy capital gains from my long call.

Along the way, I am trying out spreads and volatility plays on my paper trading account in Tiger. Some were outright disastrous, while one had a fantastic pay-off.

The fantastic pay-off came from a "long straddle", where I bought a call, and a put on Tesla at strike price of 250 before earnings come in the picture.

This is a bet on volatility, as in, I expect the price movement of the stock to go far and beyond what it would cost on my premiums. And it did happen. Tesla gapped down, and the long put became extremely valueable. The long call expired worthless.

BOUGHT Tesla Call 250- it cost me 6.75
BOUGHT Tesla Put 250- it cost me 8.42
Total cost: 15.17 x 100 = 1517

The result was
Tesla Call 250 - expired worthless
Tesla Put 250 - 38.12
End value: 3812.

So the return was more than 100%-- no wonder people love options

Funnily enough, due to work, I forgotten about this option trade and the ITM Put got exercise. Since a put option is simply a right to sell a stock at a certain price, so I had to deliver 100 shares of Tesla to the counter party, and receive 250 * 100 = 25000. 

And since I do not have any Tesla stock in my paper account, the end result is that I am now short Tesla, 100 shares.

Yangzijiang Finance

Unfortunately, I received further bad news that the CEO and China CIO of YZJ Finance has left the company together. This is to me, a huge red flag, and hence I will be liquidating this position.

YZJ Finance started off as a spin-off play, where the stock was heavily discarded after it was given FOC to existing YZJ Shipbuilding share owners. For years, it exists in YZJ Ship's books as an opaque, black-box figure and was always suspiciously look upon.

My faith was rested not on the majority shareholder (Ren Yuanlin), but on the CEO (Vincent Toe), which had sold his company (GEM Asset Management) to YZJ. So why would the CEO quit, with no immediate replacement, along with another high ranking official, just like that? 

Before this news came to light, both YZJ Ship and Finance dropped about 6% on Thursday. Perhaps this is the reason. Another major movement prior to any disclosure... hmm...

Afternote: YZJ Finance fell as much as 16% to 0.285 before recovering to 0.32.. sigh.

I lost count how many double digit intraday percentage losses I have endure over these two years. Bad run continues.