Trade Update - Wal-Mart
Trade Update - Wal-Mart
Hello Smart Option Sellers! Let's go over what happened on Friday with our new put-sell play on WMT. As mentioned in Friday's alert, Amazon (AMZN) decided to buy out Whole Foods Market (WFM) for $42 per share. This sent shockwaves through the whole food & grocery sector, causing all the main players to see significant share price drops. Major retailers that sell food items - Target (TGT), Wal-Mart (WMT), Costco (COST) and Kroger (KR) all got hit on Friday (as well as others). Since I believed this was an overblown situation, it led me to a logical decision to enter a new put-sell position on the biggest physical retailer on the planet - Wal-Mart (WMT). WMT stock was down $5 per share near the open of trading, and you know how I love it when high quality stocks have big drops like that. It makes for great opportunities for us, as we can take advantage of an overblown situation. But, once people come to their senses and realize the move was not warranted, the stock usually starts to move back up in the following days, and sometimes within hours. Not only can the stocks move back up, but the volatility that causes the option prices to spike initially, can come back to earth as well, taking the option prices back down with it. In situations like this, we have to be quick on our feet and fast with the executions, only because the opportunities could slip away sooner than we realize. About five minutes before the alert hit your email at 10:23 am EST on Friday, the bid/ask on the WMT $60 put option was $.40 bid/$.45 offer. In the alert, I mentioned that the bid/ask was $.36 bid/$.44 ask, so it had gotten even more expensive, which was great for us since we'd be able to sell it at a very good price. My instructions were to sell the put option in the range of $.30 - $.40 per contract. Clearly, with the option price currently bid at $.40 per contract, my thoughts were that everyone is going to get filled at really good prices. And to even prove that fact, look at the picture below, which shows the "Time & Sales" report for the $60 put option at 10:18 am EST (five minutes before hitting your email). The Time & Sales report gives you a second by second running ticker of the bid/ask price of the option, as well as any price it may happen to trade for.
You can see the Date, Time, Bid & Ask columns. Clearly, at the time of 10:18 am EST, the bid/ask on the $60 put option was mostly $.40 bid/$.45 ask. There was no way I thought that the price of this option would drop as quickly as it did. I gave a $.10 cushion (to sell it as low as $.30 per contract) which I never thought we would need. But, within an hour or so of delivering the alert, the bid price had dropped below $.30 per contract. This was caused by the stock price ticking back up (by $1.25 per share) and the spike in volatility starting to decline - a double whammy for put option prices. Just an unfortunate scenario for us. We had some Smart Option Sellers email their fill prices to me, and clearly they were some of the first ones to the trade. Most of them came in around $.36 per contract. Obviously, since my instructions were to sell in the range of $.30 - $.40 per contract, no one should have sold for less than $.30 per. If you did get filled within that range, please email us your prices. Although this trade was available only for a very limited time on Friday, we will follow it as an official position and I'll mark it at the low of $.30 per contract, even though we had fills higher than that. Here's what we did: Sold (sold-to-open) the WMT October 2017 $60 put options for an official sale price of $.30 per contract as an opening transaction (sold-to-open). As of now, this put option has a market of $.22 bid/$.30 offer, so I want everyone who hasn't been filled yet to continue to work your sell order "GTC" at $.30 per contract. If WMT stock (and the other food retailers) have another trip lower, which I think they will due to residual selling, the put option should pop back up in price to allow more fills for us. If it looks like the damage is short-lived and the stocks move back up, I will see if it's worth changing our sell price to a lower level. For now, continue to work the sell order GTC at $.30 per contract. You can contact us here Continue to hold all other positions as-is. See the Current Portfolio below for current prices & instructions. Regards, Lee Let's Grab That Cash!