Investing in the US (Part 2) – Generating 40% returns
This is a continuation from my previous article about the reason to invest in the US and the platforms I use.
In the beginning: Exposure
My exposure to investing in the US came quite unexpectedly middle of last year in the form of an email. It was one those hundreds of marketing emails that keeps on probing you to either sign up for a class, give you a free class, teaching, trading, what-nots.
For some reason, and as “fate” would have it, I clicked into this one email and decided to sign up for it.
This particular free intro session was held in Phileo Damansara – where Eastin Hotel PJ and Menara Star is. At night that place looks dodgy as heck – dark, quiet, scary… If you’ve been there at night, you know what I’m talking about. This is very similar to the MLM experience I shared in a prior post.
What’s with all these people finding dodgy places to hold talks? Cheap rental, probably.
Experiencing: The Pitch
Ignoring the dodge-ness of the location…
As I entered a small room with around 10 attendees, I was introduced to the speaker, Terence Tan (Yes, one “R” only), who claimed that he had been making a fortune from trading options.
I am a finance graduate so the topic of Options is not a new thing to me. However, in Malaysia we do not have a robust Options market like that in the US. What I liked about this free session I attended was how dumbed-down Terence explained the concept of Options and drawing very close parallels to insurance.
In the 1 hour session, Terence freely shared his knowledge on Options trading in the US market.
What got me sold was:
- His explanation was simple and easy to pick up
- He shared a great deal about how he focuses on low(er) risk trades
- The session doesn’t sound like some dodgy MLM sales pitch
- His program (obviously he is selling into a program) involves a period of coaching where we can copy his trades via a live trading session and learn from him on the go [On hindsight, I think this was the best thing from the whole program]
The Program: I’MPossible Investors (IMP)
Cut the story short, I signed up to learn from Terence Tan on how he trades options in the US market – which he coined the IMP style of investing.
IMP style of investing focuses on options trading on strong fundamental stocks.
So we won’t be seeing any Tesla, Snap, FAANG stocks anywhere. Shucks…
Some highlights of the program:
- 2 full days of learning with Terence
- Focus is on the fundamentals of stock picking, Options strategy and repair strategy
- Case study and simulations to familiarise ourselves with the IMP style
In terms of strategy, IMP utilises the Put Spread options strategy (i.e. selling 1 option and buying another option with same expiry but different strike prices).
Illustration
If this sounds alien to you… Imagine an insurance company selling to you a policy with a premium of $10 and payout of $10k, but at the same time buys another insurance with a premium of $8 and payout of $8k.
- The insurance company pockets $2 premium if nothing happens.
- If something happens and you claim the $10k insurance payout, the insurance company only loses $2k because it pays you $10k, but the (RE)-insurance company pays it $10k.
The 2 biggest takeaways for me:
- How to repair a trade (i.e. if the trade goes awry, there is a way to recoup the losses and profit more if we’re lucky); and
- 6-months of live trading mentorship with Terence to learn on the go.
Let me put this here: This is not your “go for class come back and become Godlike investor” nonsense. There is frequent practice, revision and self-study required.
Pain Point: Converting RM to USD
For Malaysians, one of the biggest challenges when it comes to investing in the US market is that we feel how painfully small our currency actually is.
Our money shrinks at least 4 times when we convert to USD. You will feel it… very quickly.
This limits what we can do. It is tougher to diversify, especially if we want to invest in growth tech stocks that is priced upwards of USD100 for one share.
And, we make 4x more and lose 4x more too because every dollar movement = RM4 movement.
Specifically for Options: It is difficult for a small account to dabble in options because each option is tied to 100 shares (e.g. 1 Option trade on Pfizer is equivalent to 100 shares of Pfizer priced at $35 = USD3,500 / RM14,000).
However, Terence’s IMP style allows even small account to start participating in the options market.
My account on ToS was funded with RM8,500. This translates to around USD1,952.
So don’t despair, there is still hope for us (Malaysians)
Glossary: Definitions to know
There are some definitions that I’ll use in the next section and this glossary attempts to explain what it all means.
| Open trades | IMP option trades that are currently active and ongoing – Put spread options strategy – Sell a put option with a good strike – Buy a put option with a strike price lower than the sell put option |
| Winning trades | IMP option trades that either expired or closed successfully – Expired = Expired out of the money and worthless – Closed = Share price went up and able to close the open options position at a low price |
| Jackpot trades | Once-in-a-blue-moon “jackpot” where: – Sell leg was closed first, – Share price subsequently fell a lot, – Buy leg can be closed for a hefty premium |
| Repair trades – successful | Initial trade expired with losses (1 or both option legs in-the-money), but managed to turn around the trade and breakeven or profit |
| Repair trades – ongoing | Initial trade expired with losses and in the midst “repairing” |
| Stocks holding / sold | Bought the shares and sold for profit / loss |
| Covered call – closed | Covered call – Sell call of shares owned to pocket premiums. Expired without needing to deliver the shares |
| Covered call – ongoing | An active covered call position |
Out of the Money = Options worthless (aka insurance policy expired without any claims)
In the Money = Options will be exercised (aka got into accident and buyer of insurance policy claims from the insurance company)
Results: 1-year mark
First Portfolio
Think or Swim by TD Ameritrade (31 trades):
This portfolio yields 44.6% returns.
| Open trades | 1 |
| Winning trades | 27 |
| Jackpot trades | 1 |
| Repair trades – successful | 1 |
| Repair trades – ongoing | 1 |
The high returns here is contributed by the “Jackpot Trade” on ENSG, which gave close to 50% of the returns generated to-date.
Here is an extract of the companies I traded and the profit / (loss) from these stocks:
Second Portfolio
I have in March 2020 (yes, in the midst of the pandemic) started an account with TW as shared in my Investing in US (Part 1) post.
Tastyworks (23 trades):
This portfolio yields 16.6% returns from March till now (8 months, excluding unrealised profit / loss from stocks held).
| Open trades | 1 |
| Winning trades | 15 |
| Jackpot trades | 0 |
| Repair trades – successful | 1 |
| Repair trades – ongoing | 2 |
| Stocks holding | 1 |
| Stocks sold for profits | 0 |
| Stocks sold for losses | 0 |
| Covered call – closed | 2 |
| Covered call – ongoing | 1 |
*Caveat/warning/disclaimer: Although both of my portfolios are profitable, losses can happen! There is, by no means, any guaranteed return.
I have created a new section under BTM's website to track (& share) the performance of my IMP progress.
Closing: BTM’s Verdict
Safe to say, I am very satisfied with the results when trading with IMP style so far.
To give you a snapshot
It takes roughly 30 minutes – 1 hour of my time when market opens to perform any trade management actions and also to look for new trades. When I am fully invested (i.e. no available cash in the portfolio), I take 10 minutes max to check if I can close out any positions. All in all, it does not take up much of my time to achieve the results I have. Furthermore, there is peace of mind for me once I got the hang of it.
Options is an advanced trading / investment tool.
However, Terence has made it easy to follow and gave good guidance on how to safeguard ourselves. It is also important to take note of the danger margins that accompany Options trading. Terence has a mechanism to ensure we do not over-expose ourselves.
Bonus semi-Tip: Non-US investors are subject to a withholding tax of 30% for all dividends paid out. However, we could use Options to create our own dividends and cashflow streams.
Keen to join in the fun?
If anyone would like to partake in the IMP journey of investing in the US market, you may opt in via 2 ways:
(1) Ultimate Option Sellers Trading Membership (recommended for long term value)
Terence rolled out a membership where there are videos that you can self-learn from coupled with weekly live trading sessions.
Check it out via this link here and sign up using my Promo Code for 10% off the price: jasonspecial.
(2) I’MPossible Fast Track Mentorship (recommended if you need to go for a class with a dedicated teacher)
Due to the pandemic, everything went online. This is similar to the class I attended at the dodgy place in Phileo Damansara.
If you’d like to sign up for this, do drop me an email at betweenthemoney@gmail.com, or you could DM me on Facebook or Instagram. I’ll be happy to speak to Terence about it.
Of course, feel free to contact me if you have more questions about anything at all. Always happy to discuss!
Remember to follow BTM’s Facebook and Instagram to get more updates!
Happy investing and stay safe folks. Till next week!
