Abstract: Describe the reasons of trading short put stock options of Tencent, and share the advantages and disadvantages of this strategy.
Transaction detail
Today I am sharing with you about the transaction I made on June 23, the detail is as follows:
- Short put
- Tencent Holdings（HK stock code：700）
- 100 units of stock option
- Expiration: 2021-07-29
- Strike price: HK$560
- Stock price at transaction: HK$575
- Option price: HK$10.6
- Commission fee: HK$21
- Premium received: HK$1039
Tencent stock 30-day chart
A little bit about Tencent
I think I do not need to introduce Tencent Holdings to you, most Chinese should be aware of this brand, even if you do not know Tencent you should also know its main product WeChat. I guess many foreigners may also have heard about Tencent or even using their products or services.
I happened to find that Tencent has just become the fifth largest brand value company in 2021, as shown in the follow table. In addition, I am so proud to share with you that when I saw this table, I was surprised to find that 9 out of these 10 most valuable brand companies are already included in my growth stock portfolio. You may have a look at my portfolio if you are interested.
I mentioned my investment strategies in my previous article “Two basic investment logic – Capital gain vs Fixed income”. It is in fact very simple, just buy the excellent companies and hold them in the long term to enjoy the captain gains brought by their development. Here, I am strongly confident that Tencent Holdings will thrive in the long run.
A bit revision on the short put strategy
In my previous two articles about short put Xiaomi and short put Palantir, respectively, I have discussed the principles and practical operations of short put stock options in detail. Basically, when we do short put, we think that the stock will rise. And if the stock price does not fall below the strike price, the option premium will be earned safely. Otherwise, if its price reaches at or below the strike price, you will have to buy the stock at the strike price.
Why short put Tencent?
As I have said above, I have strong belief that Tencent is an excellent company and will just become bigger and bigger. Recently, I found Tencent has dropped to near HK$580, so I would like to see if I will have the chance to buy its stocks at a lower price. According to my short put strike price and option premium received, the unit cost will be about HK$550 if the option is to be executed and I am quite comfortable with this price. On the other hand, if it rises instead, I will also be happy to receive the 1.9% option premium return in a month, the calculation of this return rate can be found in the previous article about short put of Xiaomi. You guess if I will be able to buy Tencent at HK$550? I think one of the benefits of using short put to buy stocks is that you can be trained to be a disciplined investors with positive mindset.
Comments and sharing
If you have any questions, please feel free to leave a message or comment below, I will reply you. Or if you find anything incorrect in the article, please let me know and learn from you. If you find it interesting or it may help you in any sense, please share with other people.
