Trade Follow-Up - Alcoa
Trade Follow-Up Hello Smart Option Sellers! Alcoa (AA) Grrrr!!! I hate missing out on trades!!! Not long after the new trade alert hit your inboxes yesterday, AA stock started to climb to the tune of $1.40 per share higher, thus preventing us from getting filled. It quickly went from $45 per share to $46.40 per share. And this morning, it even climbed to $47, but has now backed off to its current level of $46.65. Now, I mentioned in a previous alert that I try to time these trades to the point where I believe the stock is getting ready to move higher. In getting that timing right, it will allow us to make a profit that much quicker. Problem is, we need to get into the trade first! Which hasn't happened yet. Our only consolation is that we at least know our stock picking abilities are working. To be fair, there was a block of a 10-contract trade that went across the tape yesterday at our price of $.25 per contract very soon after you received the alert. This was executed by a Smart Option Seller member who emailed us to let us know. Although we had someone who got filled, I cannot call a one-person trade as official because not enough members were able to do the same. But at this point, I am obligated to follow the trade. I will bookmark the fill with an asterisk and follow it in the portfolio. Let's keep the order working "GTC" for now and see if we can get lucky over the next week or so. We would need the stock to drop a bit in order for the put options to go back up in price. Let's see if that happens for us. Friday Q&A Q: Hi Lee, I bought one protective put, Feb 130 on OA. I have never encountered option spreads before: zero experience! I hope I did the right thing. Another scenario: Why not exercise the call @ 80 and keep writing covered calls on the equity like "milking the cow"? Thanks A: This question is a follow-up to last week's question about using the technique I outline in the Buffett report. It seems the call option was bought at the $80 strike price and now the stock is at $130. Well done! Do you want to cash out now or do you believe the stock has more room to run? If you think it will be stable at its current price, then sure, you could sell covered calls on it for awhile. But if the move up was part of a buy-out, then the price has probably reached its full potential. The put option will protect you against a sudden fall, so you are protected there. Not sure how much was paid for the put option, but it's a smart play if it was cheap enough. Personally, I like to "ring the register" and take my gains and go! That's just me, especially on a move so quickly like that. Either way, it turned out to be a great trade for you. Q: Hi Lee. Is profitability on the Buffett Strategy determined the same way as with our selling of puts? Is it still ROM when we buy a call? A: No, when you buy anything (stocks, options, bonds, etc), your gain is always ROI (return on investment). Only when you sell something is it calculated via ROM (return on margin). That's all for today. Hang in there everyone and have a great weekend! Send us your comments, questions & feedback here Regards, Lee
Let's Grab That Cash!
Current Portfolio 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. 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 no enter any order unless the current option price is at, or higher, than the official recommendation. If you are unsure or have any questions, please ask us!
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Warren Buffett Report I continue to get good feedback on this report, so I'll keep this notice going for the time being so everyone has a chance to see it. If you need the link again, click here to read about it.