Reflecting on my MVIS options trades. What I did right. What I did wrong. What I am going to do next.
MVIS is the symbol for Microvision Inc. It is engaged in developing a lidar sensor to be used in automotive safety and autonomous driving applications.
I was attracted to MVIS’s other technology such as Augmented Reality Microdisplay Technology, Touch Screen Interactive Display, and Consumer Lidar.
I really did not know much more than that. In April 2021, I don’t even know where and how to look for a great company.
I thought I will learn more along the way.
MVIS Options: Selling Put Options
29 April 2021 – sold 3 put options at strike $14 expiring 21 May 2021 for a premium of $450. Closed on 17 May 2021 for $255. Profit: $187.68.
19 May 2021 – sold 3 put options at strike $13 expiring 2 Jul 2021 for a premium of $735. Closed on 18 Jun 2021 for $210. Profit: $516.99
24 May 2021 – sold 3 put options at strike $13 expiring 2 July for a premium of $720. Closed on 2 Jul 2021 for $114. Profit: $597.48
5 Aug 2021 – sold 3 put options at strike price $14.00 expiring 15 Oct for a premium of $840. Closed on 27 Aug for $540. Profit: $291.88
8 Jun 2021 – sold 1 put option at strike price $18 expiring 19 Nov 2021 for a premium of $540. Assigned. Profit: $537.47
I collected $2,131.50 from 5 put options before being assigned 100 shares for $1,800. This means I got the 100 shares free and still received a profit of $331.5
7 Dec 2021 – sold 2 put options at strike price $7 expiring 31 Dec 2021 for a premium of $150. Assigned. Profit: $145.21
Another 200 shares was assigned for $1,400. I collected $145.21 which means the actual cost is $1,254.79
The total cost of 300 MVIS shares is therefore $1,254.79 – $331.50 = $923.29. Cost per share is $923.29/300 = $3.07
Although the actual purchase price of MVIS is very low, the share price has declined significantly and is currently trading at $4.48.
Is MVIS really a lousy stock? What should I do with my 300 shares now? I realized that I lacked the fundamental knowledge to be a successful investor. I need to take some lessons.
Learning to Evaluate MVIS
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 MVIS
- MVIS’s operating cashflow is negative and I think it is getting larger. The Trailing Twelve Month cashflow (TTM) is (-US$36 million).
- MVIS’s net profit margin percentage is also negative for the last couple of years. There is no TTM value at time of evaluation.
- MVIS has no loans.
- MVIS current and 5-yr P/E ratio are not available.
- The current EPS is (-$0.31). There is no 5-yr EPS
- The Value line cannot be calculated because there is no 5-yr PE.
After running MVIS through the checklist on 2 June 2022, it is clear that it is not a good company at this moment. I wish I had known this earlier. Thankfully, my MVIS PUT options trades helped me lower the cost of owning MVIS.
- Number of shares: 300
- Total cost: $923.29
- Cost price per share: $3.07
I won’t be adding any more MVIS shares and plan to let them go at an opportune time by selling call options at a strike price higher than the cost price per share. This will generate some income before the shares are called away.
2 Jun 2022 – Sold 3 call options at strike price $5.00 expiring 1 Jul 2022 for a premium of $60.