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Nasdaq BeaterDuan Yongping trades options
I wrote this article on Sunday Duan Yongping's Operation
Today, Duan Yongping provided two explanations for these two options trades selling calls on NVIDIA with a one-month expiration at a strike price of $188:
Duan Yongping: I have never directly sold a single share of NVDA, nor have I directly sold Apple. These are all the chips of my insurance company. Finding a good company isn't easy, and consistently selling options can add a lot of fun. Additionally, I almost never buy options under any circumstances, including rolling, unless there are tax considerations. Many people think I'm trading options, but I'm actually just selling options. Being able to run an insurance company this simply is quite interesting.
Duan Yongping: Gemini's explanation actually differs greatly from my thinking. I actually have no expectations for the short term at all; I only focus on whether the company has that value in the long run. For example, if I think NVDA isn't expensive at $150 in the long term, I'll first sell a put at $170 (collecting $20 upfront, with the prerequisite of having cash parked in T-bills). If it doesn't get assigned to me at expiration, I'll sell another put. If it does get assigned to me at expiration, I might also sell a call (this is called a covered call), essentially selling insurance on NVIDIA. If I don't understand the company, I cannot sell options. I call this long-term investing with short-term tactics; it's a very fun game, and the returns are decent. However, don't sell calls when a good company's stock price is too low, and don't sell puts when the price is too high, otherwise the returns might drop. I actually don't have a so-called options strategy; I only have an NVDA options strategy or an Apple options strategy. When Apple rises to a point where I think it's not cheap, I start selling some calls. If they get called away and the price falls back, I might still sell some puts. Anyway, as long as I can outperform the S&P, that's fine; at least I can outperform government bonds.
I read these two passages in their entirety. My understanding from yesterday's article was correct. I'm quite focused on this topic, so the main idea and framework were fine. Slightly selling puts based on a deep understanding of the company, all within the framework of value investing, is fine. The underlying philosophy is the same: buying stocks is buying companies, buying the discounted future cash flows of a company.
This line of thinking won't involve buying call options; taking the sell put route is fine. Practice yields true knowledge, indeed. Last year's tariffs and the current US-Iran war, both involved going long on options, but using sell puts for a year versus using calls for half a year led to vastly different fates—a divergence of two paths.
Doing a one-year sell put and not doing a half-year short-term call is the right thing to do. Doing the right thing and correcting mistakes immediately always comes at the smallest cost.
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