Trade Update And Friday Q&A
Hello Smart Option Sellers! We placed two new put-sell trades yesterday on Intel (INTC) and Merck (MRK). We got a few fills so far this morning on Merck but not on Intel yet. Let's have a little patience on these, especially with the new healthcare vote happening today in Congress. If it doesn't pass, we could see a quick sell-of that would allow us to get into these trades quite easily. On the other hand, if it passes, we'll probably see a continuation of the up-move. Sometimes we will get filled right away and sometimes we won't. We place a limit order for a reason and that's because I'm trying to get the best option price for us based on all the existing factors that are present at the time I write up the alert. I'd rather give our order a chance to get filled instead of going right to the prevailing bid price. If we did that, we'd be giving money away each time. Let's not pad the market-makers pockets if we don't have to. Merck & Co. (MRK) Although we only got a handful of fills so far on Merck, we will officially follow it. Here's what we did: Sold (sold-to-open) the MRK September 2017 $47.50 put options for an official sale price of $.35 per contract as an opening transaction (sold-to-open). For those of you who have not gotten filled on either trade, just keep your orders working "GTC". If the market doesn't cooperate by Monday or Tuesday, I will send out an alert to adjust the option prices and/or the strike prices. Don't get discouraged in any way by lack of fills. It's just part of the trading environment. There will always be more trades to come. Trading options takes a little bit more finesse and patience sometimes, as compared to stocks. I'm here to guide you every step of the way. We will be successful! Friday Q&A Q: What happens if I hold a Call Option to expiration? Say the stock price is up $5 per share - do I realize the $5 per share gain (100% delta) if I let the Call Option expire - or do I need to either sell it or roll it before expiration? I know with Selling Puts, I can either Buy back the contracts prior to expiration at any time, or if I let them expire worthless I keep the full premium. So, with Buying Calls I am assuming I need to do something prior to expiration (unlike selling Puts)? A: If you hold a call option that is in-the-money (by $5 in your example) to expiration, then you have two choices: 1. It will be automatically exercised for you which will turn the call options into actual shares of stock. You will be required to pay for the stock in full at this time. 2. If you don't want the shares of stock, then you need to sell the call options (for the $5 profit) before the end of the trading day. In addition, you can "roll" it by purchasing another round of call options if you are still bullish on the stock. Q: One may be willing to take on a bit more risk by selling a PUT at a higher strike price than recommended, but one tends to adhere to the month recommended for such PUT. Is there strategic thought in the choice of month, such as the stock traditionally trades higher during that month? A: If you are going to choose a higher strike then the one I offer up, it is beneficial to stick with the same month I recommend. I certainly don't have any stats on seasonality for stocks (I'm sure there are), but our method is to always pick expiration months that are the shortest in duration while still giving a decent payout when selling the puts. That method still tends to bring us to expiration months that are two-five months in duration. Hope that helps. That's all for today. Have a great weekend. You can always contact us here. Regards, Lee Let's Grab That Cash!
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