Options

My First Options Trade – $TDOC PUT

Calvin Lo

I just closed my very first options trade which was a put I bought on Teladoc Health (TDOC), thankfully at a profit. With that, I’ve entered into the wonderful world of options trading! I picked this as my first options trade because I wanted to find ways to protect my downside without selling my shares, especially in this bearish environment.

I was mainly inspired to learn more about options from reading this blog Learning Investment with Jason Cai. Jason shares about the basics of options trading and more importantly the rationale for his options trades. Definitely check out his blog if you want to learn more.

I decided to buy a put against TDOC as a protective PUT, mainly to hedge against short-term losses although I’m still bullish in the long-term. Other ways I know to handle short-term bearishness is of course to trim the position (which I also did) or the extreme would be to short the stock (which I feel is too risky for me).

Buying a protective PUT seemed like a good idea because I can decide how much I’m willing to risk in the option trade:

  • If the stock price continues to drop, the price of my PUT will likely increase. If the stock price falls below the strike price (in-the-money), I can either sell the PUT before expiry or wait until expiry to buy the shares at strike price.
  • If the stock price rises instead, the price of my PUT will likely decrease but my shares would increase in value to offset the drop in option value.

Details of the trade:

  • On 30th Dec 2021, I bought 1 lot (100 units) of TDOC PUT expiring 28 Jan 2022 with strike price $85 at a price of $3.00 per unit (total cost $300).
  • On 7th Jan 2022, closed the position by selling the PUT at price of $7.00 per unit (total proceeds $700).
  • Buying and selling options on Tiger Brokers where I made this trade was $2.99 per trade.
  • So total profit was around $394 (130% gain on $300 cost).
  • Concurrently, I held 12 shares of TDOC which dropped from ~$90 to ~$82 translating to around $96 loss. Btw, I’m already deeply in the red on my TDOC position.
  • Net gain was ~$300 for the holding period of the PUT, not too shabby.

Hopefully my future options trades will work out well too. I’m looking at maybe doing the same protective PUT for my position in Zoom (ZM), since I’m also expecting further downside in the near term.

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One thought on “My First Options Trade – $TDOC PUT”

  1. Pingback: How To Limit Your Downside Using Protective Put Options $TDOC $ZM $SE $ARKK – Finance Gnome

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