Reflecting on my GREE options trades. What I did right. What I did wrong. What I am going to do.
GREE is the symbol for Greenidge Generation Holdings Inc. It is actually the result of a merger between Support.com (SPRT) and Greenidge Generation Holdings.
It owns a vertically integrated bitcoin mining and power generation facility in the US. It generates electricity on-site from its vertically integrated power plant and uses it to power its ASIC miners. I thought it is kinda cool to generate their own electricity to mine bitcoin.
GREE Options: Selling Put Options
I was selling put options on SPRT from July to September 2021 and collected $624.32.
My final trade was the following:
9 Sep 2021 – sold 3 put options with strike price $10 expiring 15 Oct 2021 for a premium of $510. Assigned. Profit: $506.28
I collected a total of $1,130.60 up till then.
I held the 3 options contracts above during the merger between SPRT and GREE. They were automatically converted into put options on GREE. The problem was that the strike price was altered and I had no say over it. This resulted in me getting assigned an odd number of GREE shares. The share price then promptly nosedived.
I wanted to be able to sell covered calls on GREE since I was assigned. In order to do that, I had to spend more money to purchase sufficient shares to make up 100 shares.
I had already paid $3,000 for my GREE shares. I then topped up $1,574.50. The total investment in GREE is then $4,574.50.
- Number of shares: 100
- Total cost $4,574.50 – $1,130.60 = $3,443.90
- Cost per share: $34.44
Major lesson learnt: Do not hold options across major events.
Covered Call Options
I sold 3 call options from 29 October 2021 to 3 November 2021 and collected $290.61.
The share price of GREE has dropped significantly in December and I found it hard to find good call options contracts to sell.
I found out how to check the probability of my options contracts by looking at Delta. It is still risky because I am setting strike prices that are below my cost price of $34.44
I sold another 2 call options and collected $41.30. My total profit from selling call options is $325.05
The share price at this point has dropped to $8.22. It is getting depressing.
Learning to Evaluate GREE
At the beginning of 2022, I attended a course called Options Millionaire Intensive bootcamp (affiliate link). OMI is a 3-day live bootcamp (virtual when I attended). I learnt some interesting investing concepts and strategies. One of them is a checklist for evaluating whether a company is good.
I know this is not comprehensive analysis but I think it is a good place to start for beginner investors. Baby steps.
- Operating cashflow (OCF) of a good company should be consistently positive. A bonus if it is growing.
- Net profit margin should be positive. 10% and more to be considered good.
- Interest coverage ratio should be positive. The larger the number the better. Nil is also good. It means the company has no loans.
- The current year Price/Earning ratio (PE) should be lower than the 5-yr PE
- The current year Earning Per Share (EPS) should be higher than the 5-yr EPS
- The Value line should be higher than the current share price. This means that the company shares could be trading at a discount.
Applying the OMI Checklist to GREE
- GREE’s operating cashflow is negative in 2019. It turned positive in 2020 and 2021 at 1 million and 26 million respectively. That seems like fast growth. If they continue to grow at this rate, 2022 cashflow should be healthy.
- GREE’s net profit margin was negative from 2019 to 2021. That is not good although I can see that the negative values are closing up quite fast.
- Interest coverage is (-3.45). Again, not a good sign.
- PE ratio is not available
- The current Earning Per Share is (-$0.12).
- Value line cannot be calculated without PE data.
Analyst Ratings and Stock Price Forecasts
GREE did not pass the OMI checklist. But I feel that GREE is a good company and just need some time. I looked at additional information that look at future potential. Stockanalysis.com offered some helpful forecast figures at https://stockanalysis.com/stocks/gree/forecast/
Revenue growth for 2022 and 2023 are forecasted at 100.15% and 51.97% respectively. EPS for 2022 and 2023 are $0.47 and $1.95 respectively.
According to 8 stock analysts, the average 12-month stock price forecast for GREE stock is $26.52. The lowest target is $10.1 and the highest is $44.1. Morningstar Quantitative ratings calculated share price of $17.39.
GREE’s future looks good. I think it is something I would like to invest a little bit more in.
Selling Put Options for a Discount
I have decided to dollar cost average by purchasing 200 shares by selling put options.
21 March 2022 – sold 2 put options with strike price at $7.50 expiring 14 April for $100. Closed on 11 April at a cost of $20. Profit: $73.61
12 April 2022 – sold 2 put options with strike price at $7.50 expiring 20 May for $146. Assigned. Profit: $142.29
I collected $73.61 + $142.29 = $215.90 for both options. Total cost of 200 share is $1,500 – $215.90 = $1,284.10
- Number of shares: 300
- Total cost $3,443.90 + $1,284.10 = $4,728
- Cost per share: $15.76
June 2022
GREE’s share price has dropped to $4.54. I am interested to DCA again using Put options. But the perennial question: is this the bottom?
The data I used for evaluation are sourced from Firstrade.com and Moomoo (affiliate
