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My trading record (2021-08-17, bought HK stock Tencent, close Tencent short put)

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解釋買入港股騰訊及平倉騰訊Short Put期權的原因,並分享我的看法。

Abstract: Explain the reasons of buying HK stock Tencent Holdings and closing Tencent short put and share my views.

Transaction detail

What I want to share with you today is the transaction I made on August 17. The details are as follows:

Bought stock

Tencent Holdings Ltd (700) 52-week stock chart
Tencent Holdings Ltd (700) 52-week stock chart
Image source: http://www.aastocks.com/en/stocks/quote/detailchart.aspx?symbol=00700

Bought back to close short put option

  • Tencent Holdings Ltd (HK stock code: 700)
  • 100 option units
  • Expiration: 2021-08-30
  • Strike price: HK$430
  • The underlying stock price at the time of trading: HK$435
  • Option value: HK$14.05
  • Commission fee: HK$21
  • Total premium paid: HK$1426

Reasons behind this transaction

Recently, Tencent’s share price has fallen again, and it has almost fallen to the recent low. It has fallen by nearly 22% since the last time I exercised a short put at the end of July at HK$560. You may see here for the detailed record of the option opening. Therefore, the decision to increase holdings again this time is mainly because they are still confident in Tencent’s long-term investment value.

I could have waited for about half a month to see if I could exercise my short put to buy Tencent at HK$430, but in the end I decided to buy 100 shares of Tencent directly at the current price of HK$435.6, because I think the current price has fallen to the very attractive price level, and I am afraid that it will rise again after half a month so that I will be unable to buy at such a low price. Since I chose to buy the underlying stock directly, I thought it wound be unnecessary to continue to hold this short put with a strike price of HK$430, because I am not willing to buy it again at such a similar price level. However, if the stock price continues to fall, I will consider reopening short put of Tencent at a lower strike price.

This time I admit that I was a bit of lack of discipline. I did not wait for the end of the month to see if I can buy at the strike price of HK$430 according to the original plan I made before. Instead, I bought the underlying shares directly at the current price. But I want to stress that one of the shortcomings of opening short put option to try to buy a stock at low prices is that when you earn the option premiums, you will lose the opportunity to buy stocks at lower prices before expiration. This time, after an in-depth consideration, I chose to give up the chance of earning the option premium of HK$1000+, in exchange for buying stocks directly at a price that I think is very attractive, because I think buying the stock at this low price will earn me a lot more in the future than the option premium of HK$1000+.

On the other hand, although Chinese stocks have continued to be affected by unfavourable policy news recently, I believe that the mainland central government’s policy is not to overthrow these large technology companies, but it is instead on the purpose to regulate the orderly development of various industries to avoid over-expansion, causing damage to the public interest. I believe that in the long run, say 5 or 10 years later, the development of these large enterprises will still get better and better.

Of course, no one really knows at what price the short-term bottom is or when will the decline really end, but I think one of the keys to long-term success in investment is to have the courage to seize the opportunity to buy great companies when the stock price is low, and wait for the company to get over the bad news. Later, when the market re-evaluates the stock, it will certainly rise up again, allowing your investment to achieve capital appreciation. Of course, anyone may be wrong. There are many reasons for this. It may be policy factors, company management mistakes in decision-making and many other factors, but these are often difficult for investors to predict in advance, so diversification of investment is particularly important in protecting your assets.

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.

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