Let's Lock It In - EMR
Time To Lock In More Gains
Hello Smart Option Sellers! As option sellers, one of our biggest allies is "time decay". Time decay is the process by which option prices erode in value a little bit day after day, regardless of which way the stock moves. In Greek terminology, this is also called "Theta". You may hear that word when professional option traders talk shop. To read more about time decay, open up my Put-Selling Basics guide. Check out Page 8. As stocks meander in price, whether it's higher or lower, we can count on time decay to work for us. The more it looks like the stock won't get to the strike price that we've sold, the faster and larger the time decay kicks in. Why is this good for us? Because when we've sold a put option as our initial transaction, the only way we'll profit is if the option price declines. If it does, we can buy it back at a cheaper price and lock in the gain. Our method = sell first, buy back second. Emerson Electric (EMR) We currently have a put-sell position on EMR that has decayed down to a level in which we look to buy it back and lock in the gain. This level is called my "80% Rule", which states that if the put option price has decayed 80% from our original sale price, we buy it back and book the profit. As of now, we'll try to buy the EMR put option for its smallest listed price on the exchange, which is $.05 per contract. Since it does not trade in penny increments, we'll have to settle for a 75% reduction in price, just a tad shy of my 80% Rule. We are still two months out from option expiration, and it's always a good idea to lock in gains early of this magnitude when you can. It frees up margin money that you can put towards new trades and it helps pad our bank accounts. I like that! Note: If you have this position in your account, then you will execute the buy-back order today. If you don't have the position, then you can disregard these instructions. Here's what you can choose to do: Buy back (buy-to-close) all of your EMR September 2017 $45 put options for a limit buy price of $.05 per contract, GTC, as a closing transaction (buy-to-close). Currently, this put option has a market of no bid/$.10 offer. We'll be putting in a $.05 bid which I'm pretty sure will get hit and give us the fill. EMR stock is currently at $60, putting it a solid $15 above our strike price of $45. This is why I'm confident we will get filled. Our original entry sell price for this trade was a smaller-than-normal $.20 per contract back on May 3, 2017. Closing it out now allows us to end the trade early, a little under two months before expiration. Get those orders in now and let us know how you do (if you are involved with this one) and I will go over the full results tomorrow. You can contact us here For those of you involved with this trade and wish to roll the dice and hold it until expiration. that's entirely fine too. Most likely it iwll expire worthless and you can capture the extra $.05 profit. Officially, we are going to close it out at $.05 per contract starting today. That's all for now. Continue to hold all other trades as-is. See the Current Portfolio below for current prices & instructions. Quick note on the Current Portfolio - if you are a new subscriber and don't have a position yet on any of our trades, make sure you enter your order at the original recommended sell prices. Do not enter any order at current prices unless it's higher than the official recommendation. If you are unsure or have any questions, please ask us! Regards, Lee Let's Grab That Cash!