Trade Updates And New Ideas
Hello Smart Option Sellers! Important Messages: I've finally crawled out from under my rock and entered the social media age. I'm on Twitter! What does that mean? It means I will be posting some of my thoughts from time to time on items related to investing, the stock market and how to be a smarter options trader. If you are already a Twitter member, please go to the website and click on the blue Twitter "Follow" button that you'll see along the top header. This way you can read my tweets and have instant access to some of my other thoughts. And don't forget to "like" or "re-tweet" my posts. This helps increase the public's awareness of the great things we're doing at The Smart Option Seller. Don't worry, no one in the public will have access to any of our trading ideas, nor will I post any trades for free. Also, don't forget to read my new "Put-Selling Basics" guide. It's a great refresher for both experienced and new traders. It's totally free. You can find it on the website or just click here to read. And lastly, many of you are not taking advantage of our phone text alert messaging system. If you'd like to be notified on your mobile phone when a new alert is about to hit your email inbox, join our text alert system by typing in your first & last name and mobile number here: Kellogg (K) We were not able to enter the new Kellogg put-sell trade I recommended yesterday. Obviously, the option market had other ideas about the value of this put option. I pegged its fair value near $.30 per contract, but the market thinks otherwise. We are not going to adjust nor are we going to choose a different strike price. I want to give this trade more time. For now, leave your order in as "GTC" (good-till-cancelled) at whatever price you decided on. Remember, I recommended to sell in the range of $.25 to $.35 per contract. If we don't get filled, then so be it. If we do, great. Here's the original order again: Sell (sell-to-open) the K July 2017 $55 put option for a limit sell price in the range of $.25 to $.35 per contract, GTC (good-til-cancelled), as an opening transaction (sell-to-open). New Ideas I've gotten a lot of feedback on the success of the Target put-buy that we executed as an unofficial trade the previous week. Many of you are wondering (and hoping) if I could make that a regular thing. I'm all for helping my members make money and I will certainly oblige. Consider this an extra feature of your membership at no extra cost. A few caveats: 1. These new recommendations will all be unofficial trades. So you can't hold me to it! 2. Buying options has a very low probability of winning. You all know my thoughts on that. There's a reason why we stick with selling put options - the win rate is 90% and higher. You don't want to mess with that. So, if you get involved with the buying options game, be prepared for more losses than gains. 3. There won't be as many as you think. Probably just a handful during each earning's quarter. I've always said that earnings are a crapshoot and you never know which way the stock will move afterwards. But, you can certainly make money playing the earnings game if you know how to approach it. And I will try to help with that. The key is finding stocks that have a history of making large moves after their earnings come out and finding those option contracts that are not pricing it in. That's where the opportunity lies. We need to find undervalued options that are mis-priced based on the past history of the stocks. And that's what happened with the Target trade. Others are out there, and I will present them to you. I get it - it's totally fun to take the big speculative swing. And when you win, it feels really good. My goal here will be to keep the cost of the options cheap - somewhere between $.05 to $.50 per contract. That way, you'll keep the cash outlay to a minimum. I'll be scouring the upcoming earnings reports each week now and if something pops up, I'll send it out. Other Ideas Now, there's another unofficial opportunity that I've been thinking about offering to you all as well. We love selling put options and I try to offer you the best and safest ones that give you a decent upfront payment. But there's also plenty of great put-selling opportunities that pay anywhere from $.05 - $.15 per contract that are even more conservative and safer than the ones I typically recommend. I've been holding back on these only because commissions come into play, so I need to cover that aspect. If you sold a put option for $.10 per contract, you would received $10. But, if your commissions are $10 per contract, you wouldn't make any money on the trade. So, before jumping into these lower payout trades, you need to make sure your commissions will not eat up all the upfront payment. In today's market, option commissions have gotten smaller and smaller. Many of you are probably paying in the $1 - $2 per contract range for commissions. That's really good. So if you sold the option for $.10, you'd have an $8 or $9 profit potential per contract. Also, regular margin requirements still apply, so you'll have to factor for that as well. You'll be tying up funds for a period of time for these smaller payouts, so consider that into the equation before jumping in. With that said, here's a new unofficial opportunity: Alcoa (AA) Sell (sell-to-open) the AA July 2017 $20 put option for a limit sell price in the range of $.10 to $.15 per contract as an opening transaction (sell-to-open). Alcoa stock is currently near $34.35 per share has had a huge run-up since the election in November. There's been a little bit of profit-taking since it almost hit $40 in the middle of February, and it could see some more pull-back in the near future. As of now, it's down over $1 per share this morning. $20 per share is a very long-term support area for AA, so it would not be a bad deal if one had to buy shares at that level if assigned at expiration. I'm not saying that will happen, but make sure you know that going in. Currently, the market on this put option is $.10 bid/$.15 offer, so it is certainly attainable. If you agree with my assessment on Alcoa, then this trade might be right for you. Remember, these are unofficial trades, so I won't be following them. Also, double check your commissions and fees to make sure you will come out ahead if you decide to sell them. Friday Q&A Q: I tried to sell the Kellogg July $55 puts at 25 to 35 cents but the market makers had quickly moved the spread down to 5 to 25 cents. I'm hoping that will adjust back up in the next couple of days, but I've been shut out of other trades in similar fashion. I guess they subscribe to your service and lie in wait for each recommendation. Any suggestions besides patience and close monitoring? A: I don't agree with the value the market makers have put on the Kellogg trade for now. Sometimes we just have to be patient. As much as I'd like to think we're a popular group, I highly doubt anyone is watching us. I know you're most likely joking, and it would seem at times as though the market makers are playing with us on purpose, but sometimes we just can't get into a trade. No big deal. Plenty more coming along. One of the things that certainly makes the environment harder for us option sellers is the lack of volatility in the market. I've lamented about it many, many times in the past. Since volatility has a direct effect on an option's price, the lower the volatility, the lower the option price will be. Not an ideal scenario for us. Take a look at a long-term chart of the VIX and you'll see how it's scraping along all-time lows. Anyway, we continue to fight on. Continue to hold all other open positions as-is. That's all for now. I hope these new ideas and trade opportunities will be something that you'll find worthwhile. I want to add value to your membership so you'll be more than satisfied. Please shoot me an email to let me know your thoughts. I love getting feedback. You can always reach us here. Have a great weekend! Regards, Lee Let's Grab That Cash!
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