How an office worker trader can steadily earn rental income in the US stock market and crypto market.

Introduction At six in the morning, Zhang Chang's account is on the brink of liquidation. In one hour, the price of Ethereum plummeted by 20%, while the money he used to top up his margin was locked on the blockchain, unable to move. He could only watch helplessly as the system executed a forced liquidation. After he exited, the market ironically rebounded from the bottom. This is not Zhang Chang's first time paying tuition in the market. Over the past six years, he has exchanged real money for a set of survival rules: "Do not borrow money, do not short sell, do not leverage, do not engage in what you do not understand." This set of rules has transformed him from a speculator trying to predict the market into a calm risk manager. He gave up all complex options strategies because he found that no matter how sophisticated the combinations were, they couldn't hedge against human greed and fear. Now, in his arsenal, there are only two of the most straightforward tools left: selling put options and covered calls. The former is waiting to buy a good company at a desirable low price, while the latter allows the assets to work for him while holding onto a good company. Zhang Chang believes that the ultimate goal of trading is to return to the essence of business. Options are not chips for betting on size, but tools that serve the ultimate purpose of "holding good business with good prices." In this issue of "SignalPlus Big Player Dialogues," he will share in detail his practical experience spanning the US stock and crypto markets, as well as the investment rules that were earned through hard lessons.

From stocks to options: Why are options a versatile tool? SignalPlus: Please let Zhang Chang introduce himself first, including his professional background, educational experience, and how he became interested in investing. Zhang Chang: My major in college was related to economic investment, so I have always been quite interested in finance. After graduation, I worked in investment trading at a small private equity fund. Initially, I focused on domestic A-share stock investments, and at that time, I was not familiar with options. Later, I saw that other colleagues in the company were using options strategies, which is when I started to learn about and get in touch with options. The first thing I did was domestic index options, such as the SSE 50 ETF and the CSI 300 ETF options. I believe that options have a huge advantage over stocks: any strategy that can be implemented with stocks can also be implemented with options; however, there are strategies that can be implemented with options that cannot be done with stocks. Therefore, overall, options are a superior tool compared to stocks.

SignalPlus: In the early stages of your investment trading career, what key insights or events led you to choose options as the core tool for your livelihood? Zhang Chang: When I first started, I was involved in both stocks and options. At that time, I wasn't sure which one suited me better and was in the exploration phase. Later, I found that options indeed have many advantages that stocks cannot match. Moreover, my colleague who trades options has a very stable strategy. He employs a neutral double selling strategy, which has a very small drawdown and a decent annualized return. I see that this strategy is absolutely impossible to achieve with stocks; only options can do it. Therefore, I am determined to master option strategies in addition to stock strategies. Of course, I still use a small portion of my funds for stock investments. If there are good opportunities, I will also buy spot, but the main funds are still focused on options. SignalPlus: Besides achieving stable returns with controllable drawdowns, what are the obvious benefits of options that stocks may not necessarily provide? Zhang Chang: Options can express your views on the market more precisely. For example, if you buy stocks, your view must be that "this stock will rise significantly in the long term." If you judge that the stock will only have a "small increase," then buying the spot is not very cost-effective, because considering factors such as opportunity cost, a small increase is not very meaningful. Therefore, buying stock in the spot market usually implies an expectation of a major market movement. Options, on the other hand, allow you to express a more diverse perspective. For example, if you think the underlying asset will only rise slightly in the future, you can implement a bull spread strategy. Alternatively, if your view is that the market will consolidate and oscillate, stocks cannot profit because they must go up. But options can; the classic double short strategy can profit in a sideways market. The options toolbox is very rich, and almost any perspective you have on the market has a corresponding tool to help you realize it. SignalPlus: Many people are willing to trade spot but avoid options. A major reason for this is that they feel options do not provide opportunities for "getting rich quick" and are not satisfied with steady returns. What do you think of this viewpoint? Zhang Chang: I believe there is no good or bad strategy, the key is whether it suits oneself. It's certainly possible to make many times the profit in stocks, for example, Duan Yongping made over a hundred times by buying NetEase early, and he used stock spot trading. However, Duan Yongping has also started to focus more frequently on options trading now. As long as a tool can make money, it is a good tool, mainly depending on personal character. Some people pursue quick riches and enjoy big markets and large fluctuations; this character may be more suited for stocks or contracts. However, if one's character is more conservative, preferring a steady stream of income and slow profits, without the pursuit of getting rich overnight, then trading options would be a very good choice.

US Stocks vs Crypto: Collecting Rent in "Certainty" vs "High Volatility" SignalPlus: You mentioned that you are a white-collar worker. How do you balance your main job with trading in two markets (U.S. stocks and Crypto)? Does the options tool give you a special advantage in time allocation? Zhang Chang: My job is relatively relaxed, and there aren't too many things to do, so I can free up a lot of time to pay attention to the market. Moreover, US stocks mainly trade in the evening, which does not conflict with my daytime work. I started getting involved in the crypto market only in 2024, so it's not been long, and I am still quite conservative. Therefore, there isn't much difficulty in maintaining balance. SignalPlus: What initially sparked your interest in the cryptocurrency market? Zhang Chang: At that time, I was following some bloggers online about options and accidentally came across the official account of SignalPlus. I watched the video explanations inside and found that it mainly deals with crypto options, so I went to learn more about it and gradually started to engage in this area. SignalPlus: What are the similarities and differences between options trading in the US stock market and the cryptocurrency market? What is your overall experience of transitioning from the US stock market to cryptocurrency? Zhang Chang: Personally, I prefer the US stock market. Because I have a background in fundamental and value investment research, I trust this analytical system. For US stocks, I am good at company analysis. However, cryptocurrencies are not stocks; you cannot analyze their "value" using traditional methods. They do not have financial statements, operating data, or cost expenses, so I do not have a strong grasp of it. One of the benefits of the US stock market is that many of its assets have relatively weak correlations. For example, although they are all US stocks, the technology sector is not strongly correlated with the pharmaceutical and consumer sectors. This is completely different from the cryptocurrency market, where assets tend to rise and fall together. As long as Bitcoin performs well, other altcoins generally follow suit, with their correlation being at least over 90%.

This strong correlation makes it difficult for you to effectively diversify risk. In the U.S. stock market, I can spread my positions across different sectors, allocating portions to technology, pharmaceuticals, consumer goods, and Chinese concept stocks. It is difficult for them to experience the same rise and fall, which is very beneficial for diversifying risk and controlling drawdowns. SignalPlus: The US stock market is more mature compared to the crypto market, making it more suitable for risk-averse investors like you to manage risk? Zhang Chang: Yes, the volatility in the crypto market is too high. In the A-shares market, a fluctuation of less than 1% in the main indices in a day feels significant, and the US stock market also generally has low volatility. It's different in crypto; a daily fluctuation of 5% or 10% in Bitcoin or Ethereum is quite common, and a 20% fluctuation in Ethereum over a few days is also very usual. This high volatility is very dangerous for sellers—if risk control isn't done well, significant losses can easily occur. Therefore, one must be particularly cautious when dealing with crypto options. SignalPlus: We understand that your core strategy is selling Puts and writing Covered Calls (. Under your strategy, is the high volatility of the crypto market a good thing or a bad thing for you? Zhang Chang: Not necessarily. If there is large volatility, the implied volatility (IV) for options pricing will be very high, which is something option sellers like to see. The key lies in leverage. If you add leverage, then large volatility can be a disaster for you. Assuming you have a principal of 1 million dollars, you sell a Bitcoin Put option with a nominal principal of 1 million dollars. As long as you do not over-sell or use leverage, it doesn't matter even if the market crashes, because you won't be liquidated. Moreover, since you have chosen to sell a Put, you must be prepared to take delivery of the underlying asset. If you do not intend to take delivery, you should not sell a Put at all. As long as I decide to sell a Put, I am already prepared to take delivery of the underlying asset if the strike price is breached.

In this mindset, high volatility is not a bad thing. SignalPlus: Will you adjust your strategies based on the characteristics of the crypto market? Or are the strategies for the two markets basically the same? Zhang Chang: There will be differences. In the US stock market, because I conduct in-depth company value analysis, if I determine that a company's long-term value is excellent, I dare to sell at-the-money puts, because at-the-money options have about a 50% chance of being exercised, and I am willing to take the underlying asset at that price. But in the crypto market, I still feel a bit "vague" about BTC and ETH. I have no confidence. I can't use my traditional value investment philosophy to analyze their future. They are primarily driven by "consensus", and consensus is something that is hard to define. What if one day people's consensus disappears? That is a possibility. I am still very worried about the impact of quantum computers on Bitcoin. It seems that everyone is not very concerned about quantum computers now, always thinking that Bitcoin can upgrade to quantum-resistant algorithms. However, after researching, I found that it is actually very difficult for Bitcoin to upgrade to quantum-resistant algorithms. If, say, in twenty years quantum computers really mature and can crack Bitcoin, and Bitcoin cannot upgrade to quantum-resistant algorithms, then it could be very dangerous, and it might even go to zero. I don't dare to take large positions in such long-term risky assets; I can only be more conservative. SignalPlus: Given the many uncertainties in the crypto market, why do you still choose to trade in this market? Besides the high IV being advantageous for sellers, what other aspects attract you? Zhang Chang: After all, it is a new thing. Blockchain and Web3 are indeed a major trend for the future. For such a promising new concept, it is essential to continuously learn and maintain an open mindset. If you stop learning, you may be left behind by the times.

Four Iron Rules Learned from Liquidation and Value Traps SignalPlus: In your six years as an options seller, there must have been shining moments as well as difficult times when the market taught you lessons. Could you share the most impressive experience you had and how it influenced your subsequent trading? Zhang Chang: I would like to share a painful lesson I learned in cryptocurrency. It was early August 2024, and I had just started to get acquainted with crypto options, without a deep understanding of their volatility. At that time, I primarily focused on Ethereum because its IV was higher than Bitcoin's, allowing me to collect more premiums as a seller. Ethereum had already dropped about 20% over the course of a month, and I subjectively believed it was oversold in the short term, so there might be a rebound. Therefore, I attempted to make a short-term rebound trade, not expecting much, just hoping for a 5%-10% increase to close the position. At that time, I was using a crypto-backed put option and, to be conservative, I chose out-of-the-money contracts. I naively thought that it would be hard for the market to drop significantly again. As I clearly remember, that day around five or six in the morning, Ethereum plummeted by 20% within an hour. When I woke up around six, I saw that my account was already on the brink of liquidation. Worse, I had part of my funds transferred to the blockchain for fixed-term wealth management, which I couldn't retrieve, making it impossible to supplement my margin. My entire account was in a very dangerous situation, and there was nothing I could do. In the end, when the options reached in-the-money status, that small Ethereum account was completely liquidated. Ironically, just after I got liquidated, the market bottomed out and rebounded. I reflected on it: first, my leverage at that time was still too high. Second, I underestimated the risks of selling Put options in a cryptocurrency-backed manner. In a downtrend, as the price of the cryptocurrency falls, the value of your margin also decreases, which is a double blow. Therefore, selling Put options in a cryptocurrency-backed manner must be done very cautiously, and the position must be strictly controlled. Since then, all my positions must undergo stress testing. I will use SignalPlus's "Scenario Analysis" feature to simulate how my account would perform and how much I would lose if the market surged or plummeted by 20% within a day. If the estimated drawdown exceeds my tolerable limit, I will proactively reduce my holdings. Conducting stress tests has been the biggest lesson I learned from that liquidation.

SignalPlus: You mentioned that the "scenario analysis" feature of SignalPlus is very useful. As a professional crypto trading tool, what other features does SignalPlus offer that are particularly helpful for options sellers? Zhang Chang: Historical Volatility Chart. Through this chart, you can see whether the current IV is relatively high or low compared to historical levels. If the IV is at a historical low, sellers should be cautious; if it's at a historical high, sellers can feel a bit more secure because the margin of safety is higher. I also really like to look at this chart. SignalPlus: You just mentioned that it bottomed out after that liquidation. Did you take any further actions afterwards? Zhang Chang: I calmed down for a long time and reflected for a long time. When my mood had roughly returned to normal, I started opening positions again. Afterwards, I strictly limited my position size and also tried some new strategies. At that time, I was also studying the strategies of other bloggers, such as ratio spreads and iron condor strategies. However, my own attempts didn't yield very good results, so I use them less frequently now. Currently, I still mainly use selling PUTs in combination with covered calls. SignalPlus: So in your view, complex option combinations like Iron Eagle may not necessarily perform better than the two simple strategies of selling puts and covered calls? Zhang Chang: Yes, because I purely use the sell Put plus covered call strategy in the US stock market, while in crypto, I am trying various strategies. In the end, the performance in the US stock market has been pretty good, but in crypto, it has been rather average. So I am now reflecting on whether those particularly complex strategies are not suitable for me. SignalPlus: We often liken the seller strategy to "rent collection." What are your preferences when choosing the "rent collection" targets? Do you prefer those with high volatility and substantial premiums, or do you favor stable and highly predictable ones? Zhang Chang: I prefer safety and stability. For example, in the US stock market, I would choose those with long-term development potential, strong profitability, and high moats, which conform to the traditional value investment analysis system. Nvidia and TSMC are excellent choices. For some fundamentally weak targets, I will try to avoid them. For example, among chip stocks, Intel and AMD are somewhat worse than NVIDIA, and I will steer clear of them, even though their option pricing may be higher. Safety first, and I still prefer to choose those with good fundamentals. In the crypto market, I only trade options for BTC and ETH, because their liquidity and fundamentals are relatively better. SignalPlus: Under what market conditions do you usually open positions more actively? Do you mainly look at IV or market sentiment? Zhang Chang: First of all, it's the fundamentals. I must have a grasp of the fundamentals of this asset and believe that it is highly likely to rise in the long term; this is the primary screening criterion. Only after meeting this condition will I consider factors such as IV and market conditions. High IV is certainly good, but safety is always the top priority, so fundamentals come first. SignalPlus: Is there a significant difference in experience when acting as a seller in both the US stock and cryptocurrency markets? Zhang Chang: They're all pretty similar, but I personally prefer US stocks, after all, there are more quality options to choose from. SignalPlus: The market is also more mature, with more analytical methods? Zhang Chang: That's right, I have a solid understanding through the framework of value investment analysis. In terms of crypto, it lacks a bit of this. SignalPlus: Although the crypto market lacks traditional fundamental analysis, there are some native analytical methods, such as on-chain data analysis and whale holdings. Some people also prefer to use technical analysis to gauge the market; what are your thoughts on these methods? Zhang Chang: I understand on-chain analysis and have tried it, but it still feels more like a game, analyzing others' holding costs, unrealized gains, and losses. Technical analysis has also been studied, and I have done some simple quantitative backtesting, testing various technical indicators. The conclusion is that they are all not useful. So I have basically given up on the technical approach. For me, the most certain thing is fundamental analysis. Other methods can serve as support. The key is whether you can make a stable profit in the long term using this method; if you can, then use it. I have not been able to make money using it, so I no longer use it. SignalPlus: In the trading process, besides SignalPlus, what other tools or products do you mainly rely on to help you save trading time and quickly conduct screening assessments? Zhang Chang: That's it, at most I use TradingView for market trends, but for options trading, I still use SignalPlus, nothing else. SignalPlus: What tools or products do you usually use for US stocks? Zhang Chang: Regarding Futu NiuNiu. SignalPlus: There are many websites where you can check the options data flow for US stocks on the same day. Many people might look at large orders and such; aren't you too willing to check these? Zhang Chang: Yes, I don't pay attention to large order data, I mainly focus on the fundamentals. SignalPlus: Your information channel is the fundamentals, do you only look at the company's financial statements? You don't pay attention to news or the opinions of other KOLs, or options data flow, which may not be the basis for your trading judgments? Zhang Chang: Yes. SignalPlus: But many people believe that the more information there is, the more correct the decision will be. Why do you deliberately avoid this instead? Zhang Chang: Because that information may not help with investments. For example, do the opinions of famous KOLs and influencers really help with investments? Not necessarily. Can large orders really make money? It's hard to say. I also pay attention to some influential figures that I recognize, but they all have at least ten years of public performance records to prove their abilities. I take their opinions into account. For others without public performance records, I generally don't pay attention. SignalPlus: Have you traded options on Tesla? It has a lot of volatility in the news. Zhang Chang: I haven't traded it before. I don't have a grasp on its fundamentals, and its valuation has always been quite high. I only invest in targets that I understand and am confident in. If I don't understand it, I won't touch it. SignalPlus: Could you share a few US stocks you prefer? Zhang Chang: This year I mainly focused on a few: Nvidia, TSMC, and Google. Earlier, I also worked on KWEB (China Concept Stock Index ETF), as companies like Tencent and Alibaba were very undervalued at that time. Recently, the food delivery war has caused Chinese concept stocks to drop again, so I have started selling Put options on KWEB, preparing to buy some spot. In addition, some XBI (SPDR S&P Biotech ETF) has also been made recently, as it has been falling for almost three years and is at a historical low valuation in nearly a decade. SignalPlus: For many investors like you who hope to achieve steady growth through option selling strategies, if you could only give them one piece of advice, what would it be? Zhang Chang: If I could only give one, I would like to summarize it in one sentence, which includes four principles: do not borrow money, do not short, do not leverage, do not act without understanding.

Do not borrow money: This means not to engage in off-site financing, not to borrow from relatives and friends, and not to use bank operating loans or mortgage loans. Also, do not touch the financing functions of securities firms. Do not short: I have tried several times and have failed. In May 2024, PEPE increased eightfold in one month. I went to short it, and as soon as I opened the position, it continued to rise. I lost 30% in a few days and couldn’t hold on, so I cut the position, and it kept rising after that. Shorting requires enduring huge unrealized losses and drawdowns, which can be psychologically unbearable, making it easy to cut at the highest point. I have also tried buying puts to short many times, but the results were not good. So now I do not open any short positions. No leverage: This refers to on-site leverage. Cryptocurrency and US stocks can easily provide you with on-site leverage, and it doesn’t cost anything. You can open contracts with ten or twenty times leverage for free. Options also have a lot of leverage without requiring you to pay additional interest. The temptation is huge, and if you can’t resist, you will add leverage. But once you experience a significant fluctuation and a major loss, you will understand that this is very dangerous. Do not do what you do not understand: Only invest in assets that you can comprehend and feel confident about; do not touch the others. I do not understand altcoins. Many people previously made a lot of money in various chain-based projects, but I didn’t understand them, so I didn’t participate. Among the thousands of US stock assets, I only feel confident about maybe a dozen, or even less. I do not understand most others, and if I don’t understand, I won’t touch them. SignalPlus: These points may sound easy, but in reality, they are quite difficult to achieve. It seems that people often lack self-awareness, thinking they are better than they actually are. Have you ever encountered this mental struggle while trading? Zhang Chang: I often encounter this, especially in my early days. Let me share a major loss case in the A-share market. From 2020 to 2021, the A-share market was doing well, and I used the margin financing feature of my brokerage to leverage and buy some real estate stocks, such as Poly Real Estate and Sunshine City. At that time, the real estate industry was already facing negative news, and stock prices had fallen by more than 30%. However, I looked at Poly, which is a state-owned enterprise, and there were no issues with the fundamentals on the financial statements. The price-to-earnings ratio was only 6 times, and the dividend yield was 6%, making it look very cheap. I thought it was an opportunity. After buying in, the real estate stocks continued to plummet and constantly faced defaults. After Evergrande's incident, I thought the bad news had already been fully reflected, but the entire industry continued to collapse. In the end, I had to liquidate my real estate stocks with a 50% loss. If I hadn't cut my losses at that time, Poly Developments (formerly Poly Real Estate) has since dropped another 50% from where I sold. Meanwhile, another stock, Sunshine City, delisted and went to zero shortly after I didn't sell. This matter still makes me feel fearful when I think about it now. At that time, I was very confident, believing that the fundamentals were fine and the valuation was cheap, but these were all "value traps." For those continuously declining industries, the best approach is simply to avoid them. This experience also reminded me that my understanding of the world is still quite superficial; many things you think you understand, you actually don't understand at all.

Return to the essence of business, only invest in top-tier businesses. SignalPlus: This experience made you feel frustrated with fundamental analysis; why did you continue to use it as your primary analytical method afterward? Zhang Chang: The reason for this loss is not because of problems with the fundamental analysis method, but because my own fundamental analysis ability is insufficient. A person who truly understands fundamentals should never have touched real estate stocks at that time. My level was too poor; I only saw the numbers on the financial statements and was blinded, failing to see the industry risks outside of the statements. True investment experts rarely lose money in real estate; they actively avoid it. So, the problem lies with me, not the method. Later, my stock selection logic gradually became clearer, and my requirements for targets became higher. In recent years, the targets I chose have not had any issues. SignalPlus: What method do you use to select the underlying assets now? Besides looking at reports, what else do you need to do? Zhang Chang: The core point is this: understand the business model of this company. Is this business model excellent or mediocre? If it is mediocre, just give up. Because a mediocre business model cannot allow you to make money in the long term. Those that can continuously make money in the long run must be excellent business models, such as Apple, Google, NVIDIA, and TSMC. The core of selecting targets is the understanding of the business model. SignalPlus: How to Distinguish between "Excellent" and "Mediocre" Business Models? Zhang Chang: On one hand, you need to look and compare more; only through comparisons in different industries can you know who is good and who is bad. On the other hand, I have summarized three core criteria: Growth Potential: Will its revenue and profits be higher in the next five to ten years than they are now? Strong Profitability: Look at gross margin and net margin. Many industries have good growth potential, such as the former photovoltaic industry, but essentially it is a tough manufacturing sector with low profit margins, and now the entire industry is losing money. Deep Moat: How high is your barrier, and can others come and take your business? Most industries have no barriers. However, companies like Apple, TSMC, and NVIDIA have extremely high barriers that are almost impossible for others to surpass. Only by meeting these three points can it be considered a top-notch business model.

Zhang Chang's story proves that successful trading is not just the patent of full-time gamblers. An ordinary office worker can also establish a steady cash flow pipeline for their assets outside of work by strictly adhering to discipline and having a clear strategy. We firmly believe that every trader who can navigate through bull and bear markets must have a set of discipline and strategies earned through real money. "SignalPlus Dialogues: Methods for Surviving in the Market" is looking for experienced investors like you. If you are a seasoned player managing investment assets of over $100,000, we invite you to participate in our one-on-one in-depth interview. We are eager to understand your unique investment style and winning strategies, and we are willing to invest professional resources to compile your valuable experiences into in-depth articles to share with the entire community. Your success deserves to be seen. Looking forward to your contact!