I was asked this question, do you think it’s time to sell. I am like it depends. I will address this question here!!!!
Let’s take a look at NIO. I have taken this snapshot from one of my portfolios.
Time to dive in; the snapshot above was taken from the analysis tab from TOS. I own 300 shares of NIO stock and my broker is holding $8112 for the margin. Now NIO is currently trading @ 54.08, and I am presently up 2580.03 dollars. Yippee, I am in it for the long haul. Well, that is not my style. But some people look at it that way, and some will say take your money and run.
Not let’s take a realistic look at the structural risk; if NIO goes up well, that’s great. I am a millionaire. If NIO batteries exploded or news came out, highlighting any safety issues with their vehicles, NIO’s stock potentially can fall to 10 dollars or zero. Yikes, that hurt. There are two sides to a coin and I don’t know the future. But I can structure my NIO position to address structural risk.
Fixing the structural risk with 75 delta PUT options
What a difference a 75 delta PUT can accomplish in addressing the structural risk when holding stock. Now my downside loss is capped at 134.00 dollars. The Upside is unlimited. Also, previously my margin was $8112 and now it has decreased to $1650. Yippee, that’s better, right. It depends on many factors, not again!! Well, I don’t like to be in something without taking out some profit.
Buying the 75 Delta Put with the Market Money
I am seeking financing from the market. Now that I bought the Put, I am looking to finance some of the cost with the market money. Therefore, I sold the call with a 20 to 25 delta with a dollar time value or more. Therefore I have no downside risk of a loss, so if NIO is worth nothing today, I walk away with 1700 dollars. Also, the upside is capped at 4800 dollars. The margin is $1650, which is my total capital in the position.