New Strategy: Pledge-Sell-Farm

If you do not have FAANG in your portfolio, I guess your portfolio will be in the red. And it is damn red, like mine.

In 2022, I believe the US market will also have significant volatility due to the tapering and potential interest rate rise. It may just continue to be range-bound. Many of us that invested in growth stocks will continue to be bag-holding.

For those, like me, who also invested in the China Giants, will not know how long we need to be bag-holding as well.

So what am I going to do?

In 2022, I have decided to use part of my portfolio on this strategy where I will "Pledge, Sell and Farm". 

It is a strategy that I innovated after watching Chicken Genius YouTube Video below. If you have not watch it yet, here it is. 

Chicken Genius YouTube Video Screenshot

The main idea is as follows:

Pledge - Pledge a group of companies in our portfolio to ourselves for 1 year, which we do not mind liquidating if required after 1 year. If this sound stupid, the idea is just to tell yourself that you will not be selling these companies in the next 1 year. Find out how much the total value of these companies are in US$ amount. In addition, use conservative share price like Tencent at HK$300 and conservative exchange rate like US$1 = SG$1.5 to do the calculation.

Sell - Then sell puts of your high conviction companies at strike price that we do not think make sense in 1 year time. You will received some premiums upon selling of these puts option. Do note that the total amount of shares upon exercising the put options must be lower than the total value of the companies you pledged. Furthermore, the companies you pledged should not be the companies you are selling puts options on.

Farm - Then use these premiums from selling the puts to buy into dividend paying companies/trusts that may continue to provide that extra 3% to 7% dividend in 1 year time.

For illustrations purposes, many of you will have known I have some China companies and SG REITs in my portfolio. 

Let's assumed these companies amounts to US$20k. 

Then I will sell 5 puts of APPS at strike price of US$40, maturing on 20 Jan 2023 at US$500 each. I will have received US$2500. Do note that if the options are exercised, the total amount required is US$20k. This will be done through selling those companies I had pledged.

After receiving the premium of US$2500, I will convert them to SG and buy some blue chip stable REITS in the SG market, in order to receive an extra 3% to 7% dividend.

That is how I intend to carry out the above strategy. However, I will like to remind that I have only started using this strategy recently and only time will tell. Furthermore, I only applies this strategy to a portion of my portfolio.

Hope this will help you in your investing journey ahead.

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Stay tune for my next post!