GPS Profits Locked In!
Profits Locked In!
Hello Smart Option Sellers! Gap, Inc. (GPS) I didn't think we'd get it, but we did. I mentioned in last Friday's alert that we were not yet filled on the GPS buy-back trade and that we might be pulling the order, but by the end of the day, we got the trade done at our $.05 per contract price. Nice work! Here's what we did: Bought back (bought-to-close) all of the GPS January 2018 $17 put options for an official buy price of $.05 per contract as a closing transaction (bought-to-close). We originally established (sold-to-open) this put option on August 22, 2017 for a sale price of $.25 per contract, and now we took gains by buying it back (bought-to-close) for $.05 per contract. This was our fastest trade to date - just 24 days, besting our BMY trade from back in January that lasted only 26 days. The faster we can make a profit, the better! With the fill at $.05, it locked in a gain of $.20 per contract ($20 for every contract traded) and a return on margin (ROM) of roughly 5.88% in that short time span. If you like to annualize, that's roughly an 85% return. Here's how the margin calculations break down: Whenever we sell an option contract, your broker requires you to maintain a "margin requirement". The margin requirement is just part of your account funds that need to be held aside while the trade is active. You are not borrowing money from anyone nor are you paying margin interest to anyone. The margin requirement is typically 20% of what it would cost to buy 100 shares of the stock at the strike price. In this case: 20% x $1,700 = $340. Your margin requirement at your broker may be slightly higher or lower. Ask them. So our margin requirement is $340 per each put option contract sold. Our profit on this trade is $20 for every contract sold. The return on margin (ROM) comes out to $20/$340 = 5.88%. The fill at $.05 also allowed us to capture 80% of the full profit potential ($.20 gain/$.25 full potential = 80%). When selling options (calls or puts), your full profit potential is capped at what you initially sell the option for. In this case, that amount is $.25 per contract. We like to close trades early before expiration when we can capture at least 80% of the full profit potential (my "80% Rule"). This is just smart money management and it allows us to lock in gains and free up cash to be put towards new trades. If you have not been filled on this trade yet, just keep your order working "GTC" to buy at $.05 per contract or cheaper. Congrats to everyone who was involved with this one. That's all for now. You can reach us here Continue to work all other trades as instructed and continue to hold all other open positions 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 unless the current price is at, or higher, than the official recommendation. If you are unsure or have any questions, please ask us! Warren Buffett Report I continue to get good feedback on this new report, so I'll keep this notice going for the time being so everyone has a chance to see it. Here's a fresh article about Warren Buffett that might give you another reason to have a look at it. If you need the link again, click here to read about it. Regards, Lee Let's Grab That Cash!