How I have a "risk-free" position JMIA on its way to the moon 🚀
I'm going to show you how I ended up with a "risk-free" in $JMIA, what I call the "African Amazon".
When I say "risk-free", I mean, whatever I invested, I withdrew, and now, I am playing with "house money".
Say I put in $100, and my investment value goes up to $200.
I sell half, getting my initial capital back, and now, price can do whatever it wants, and I'm at no additional risk.
So for this one, I'll break it down into steps.
1. I bought 3 long-dated call options (i.e LEAPs) for Jumia.
2. A few days later, the option price double in value. I sold 2 of the 3 calls, putting me in a "risk-free" position, with additional profit baked in.
3. I now hold 1 call giving me the option to purchase 100 shares of Jumia at $10.
4. Normally, it would not make sense to exercise an "in the money" option early, but in this case, I wanted to take partial profits at 4x, so I exercised my option. I bought 100 shares of Jumia at $10 (valued at $40), and sold 25. This gave me a profit of (40 - 10) * 25 = $750.
Now I'm holding 75 shares. Let's see if this goes to the moon 🚀.
When I say "risk-free", I mean, whatever I invested, I withdrew, and now, I am playing with "house money".
Say I put in $100, and my investment value goes up to $200.
I sell half, getting my initial capital back, and now, price can do whatever it wants, and I'm at no additional risk.
So for this one, I'll break it down into steps.
1. I bought 3 long-dated call options (i.e LEAPs) for Jumia.
2. A few days later, the option price double in value. I sold 2 of the 3 calls, putting me in a "risk-free" position, with additional profit baked in.
3. I now hold 1 call giving me the option to purchase 100 shares of Jumia at $10.
4. Normally, it would not make sense to exercise an "in the money" option early, but in this case, I wanted to take partial profits at 4x, so I exercised my option. I bought 100 shares of Jumia at $10 (valued at $40), and sold 25. This gave me a profit of (40 - 10) * 25 = $750.
Now I'm holding 75 shares. Let's see if this goes to the moon 🚀.