An article about Kuaishou (1024) last week caused feedback and responses from many readers. It seems that many investors have similar painful experiences on Kuaishou stock.
Today I will analyze with you how to unlock the dilemma.
The first priority is risk management, strict control betting
According to the author's many years of observation, whether investors can outperform the market for a long time depends on their ability to control the investment bet (Position Sizing).
Almost all investors eliminated by the market are caused by excessive leverage or failure to control investment bets.
There are always too many emergencies in the investment market. Even if sophisticated investors can stop the loss autonomously, they will sometimes be changed due to the rapid decline in the market, insufficient liquidity, the sudden adjustment of the margin ratio by the brokers, or the sudden suspension of trading in more extreme stocks. Be very passive.
Under the premise of unforeseeable sudden changes in the market, as long as the investment is sufficiently diversified and the bet of each investment can be effectively controlled before entering the market, investors can effectively control the scale of losses and avoid risks, and this ability is in high-risk investments The above is particularly important.
Kuaishou (1024) fell by more than 10% last Friday (24th) and closed at 129.5 yuan.
(Xinhua News Agency)
Kuaishou suffers successfully "unlocked" relying on options
The author finds that retail investors usually blindly buy and sell individual stocks, except for waiting for appreciation or dividends, there is no other opportunity to make money.
Therefore, in addition to the control ability of investment betting, investors can broaden their horizons to expand their investment toolbox to achieve the effect of flexibility and flexibility.
Do you still remember the last time I shared with you a friend's painful experience in Kuaishou Investment?
Under the author’s suggestion, my friend reduced his share price in Kuaishou to the greatest extent by selling short at the money calls and long out of the money puts with different strike prices. The losses suffered in the process of falling ditch goods, successfully unlocked!
Evergrande can make money in actual combat
The following author takes his actual trading of Evergrande (3333) this week as an example to decipher how to use investment tools to "make money both up and down."
When Evergrande fell sharply last Tuesday (20th) due to bankruptcy rumors and other reasons, the market provided the author with a rare short-term speculative opportunity.
The author declares that this case is a very high-risk short-term speculative transaction. According to my risk standard, the investment stake should not account for more than 2% of the investment portfolio.
China Evergrande (3333) fell sharply last Tuesday (20th) due to bankruptcy rumors and other reasons. Last Friday (24th) closed at 7.26 yuan, a drop of 7.04%.
(Reuters)
At that time, the biggest risk factor presented by Evergrande was whether it would continue to fall after hitting a four-year low, and whether the stock would be suspended due to potential bankruptcy claims and policy risks.
Generally speaking, it takes up to 48 hours for the market to digest any extreme bad news, so I believe that after a sharp drop on Monday, Tuesday and two days, Evergrande’s price will gradually stabilize, but the biggest risk is that its stock has a chance Trading will be suspended in the short term.
At that time, the author noticed that the implied volatility of Evergrande's options expiring on July 29 has exceeded 200%, and the opportunity is here!
With 9 days as the deadline, the author’s operation details on July 20 are as follows:
1. Buy 3333.HK stock @$7.00 with 1% of the investment portfolio;
2. Sell the short call option (short call option) that expires on July 29 at the same ratio for $0.95, and the strike price is @$7;
3. The short put option (short put option) that expires on July 29 is sold at the same ratio for $0.60 and the strike price is @$6.25.
At the close of the market on July 29, if Evergrande’s stock price is at:
• Above $7, the maximum profit of this operation is $0.95+$0.60=$1.55 premium or +22% ($1.55/$7.00).
If Evergrande is suspended above $7, the profit will still be +22%;
• Between $6.25 and $7, the trading return is between 11.4% and 22% = Evergrande’s closing price on July 29-$7+$1.55 premium;
• Below $6.25, the result of this operation is to buy Evergrande stock @$5.85=($7 + $6.25 -$1.55)/2 of 2% of the portfolio.
Based on the current market conditions, you can then decide whether you should keep your stock positions, stop losses, or sell short at the money calls that expire in August.
Perhaps some readers feel that the maximum profit of 22% is too small.
However, from the perspective of the value-at-risk ratio, this operation provides a large safety margin and a clear investment strategy for the investment portfolio, and at the same time, the investment bet is controlled at 1 to 2% of the investment portfolio.
This actual operation case fully demonstrates the benefits of investors making good use of derivatives to cooperate with stock investment. It can attack and retreat and defend, and psychologically it can effectively reduce the impact of investors' fear of missing out (FOMO).
More "Mashan returns without looking at the mountains":
Kuaishou 350 mosquito ditch to 200 mosquitoes, typical misses, fears, tiring troubles, and individual self-help methods |
Inflation becomes Wall of Worry, smart money rains and tells two possibilities | Lin Zijie
[Financial Column]
Ma Shan returns without looking at Yue
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Lin Zijie
Author introduction: Managing Director of Mashan Capital, a senior investor, and a half-media person.
Member of the Council of Hong Kong Baptist University, member of the board of directors of the Hong Kong Securities and Investment Institute (HKSI), non-executive director of the Hong Kong Social Venture Capital Fund (SVHK), non-executive director of listed companies and investment funds.
Chartered Financial Analyst (CFA) and CPA
*The author is a licensed representative of the China Securities Regulatory Commission. The author holds Kuaishou and Evergrande stocks and related derivatives in his investment portfolio.
The case in the article does not constitute any investment advice.