Trade Results For Big Lots And Friday Q&A

Trade Results - Big Lots (BIG) Hello Smart Option Sellers! We were able to get a bunch of trades off yesterday on the adjusted BIG put-sell trade. 277 lots traded between $.25 - $.31 per contract, with many of you being filled between $.27 - $.30 (based on your emails to me). If it wasn't for the stock rallying about $1.50 per share higher after I sent off the alert (and another $1 per share higher this morning), we probably could've gotten more fills at $.30 or higher. If you think about it, the stock moving higher is a double-edged sword in a way. The goal is to always have the stock move higher after I make the recommendation - that's how we'll make our profits. But before the stock moves higher, we need everyone to be able to get into the put-sell trade first, yes? If the stock blasts higher quickly after I send the alert (like BIG did yesterday), some of you can't get into the trade. On the other hand, if the stock starts dropping and keeps dropping after I make the recommendation, many of you will contact me and ask me why the stock keeps falling when it's supposed to go up. When the stock drops, the put option prices will move higher, sometimes above where you've initially sold it, giving you a paper loss temporarily. This can happen, and it actually helps sometimes as it allows more of our members to get into the trade. But then I get emails from worried members about the stock falling who feel like they're going to get scared out of the trade and will have to buy back the put option prematurely and lock in a loss. So which way do you want it? Do you want me to be right in my trade assessment and have the stock move higher so we can benefit, or do you want the stock to go down and give you reason to worry? The sweet spot is for the stock to stay flat or move slightly lower after I make the call so everyone can enter. And then the stock can blast higher. But since my magic powers can't control the whole stock market, we have to work with what I'm given. And when I see a stock that's ready to pop, I try to get the put-sell trade out to everyone as fast as I can. I hope you can understand how this works from my end. Anyway, we'll follow the trade now, and for anyone who hasn't been filled, just keep your order working "GTC". Here's what we did: Sold (sold-to-open) the BIG April 2018 $40 put options for an official sale price of $.27 per contract as an opening transaction (sold-to-open). Friday Q&A Q: Hi Lee, Happy New Year! I'm a new subscriber and trying to get the "lay of the land" on your new alerts and trade executions. When I got the HACK alert yesterday I noticed that the bid fell very quickly from .25 to .20. I know the stock price rose .52 cents (1.64%) over the day which would put some pressure on the premium but the premium fell right after your alert yesterday morning. My questions are: 1) HACK seemed to have low volume & low open interest. I know that bigger volume & open interest means that it's easier to trade the option with a reasonable spread between bid and ask and get fills. Will the volume and open interest on these further OTM trades make it difficult or tedious to establish the position without having to be at my computer all day (day trader scenario) waiting for alerts and trying to execute the trade before one of your other members? 2) Does the large size of your subscriber base cause the option premium to fall substantially once the trade alert is sent out? If so, do you plan to limit the size of your subscriber base so your current members can achieve your Track Record? 3) You mentioned today that only 170 contracts traded between .25 - .29 and you would use .27 for the Track Record. Depending on how many contracts these members traded, is it possible that a very low percentage of your members were fortunate enough to get .27 and the Track Record that you post will be difficult for the majority of your members to achieve? 4) I know your goal is to catch these stocks at the bottom (corrections, off support, etc.) to place the trades which is great. But it also means if we don't get in the option trade soon after the alert we may never get in because the premium will keep shrinking as the stock price advances and the option decays? The put option is now .15 X .25. A: Fantastic questions, and ones that I'm sure others may be thinking as well. Let me try to go over each question one by one. 1. More liquid stocks and options will always be easier to get in and out of, but that's not the deciding factor for the trades I select. Sure, it would be nice if our selected put options had one-cent wide markets with five layers deep, like some of the most liquid stocks, but most of them don't. The price of the stock, its volatility, and the expiration date are what's most important to us getting filled, with the stock price being the top dog. With the option pricing formulas and calculations I do, I know exactly what the put option should be trading for at the time I write up the alert. I try to give us an opportunity to get into the put-sell trade at a decent price, which is usually closer to what the prevailing option bid price is. Large open interest and volume is not necessarily an issue for us, especially if we're offering the put option for sale at a price close to what the market is trying to buy it for. What we're finding recently in regards to the put option bid price moving away from us so quickly is the sheer fact that all stocks keep moving higher, every day, all day. When stocks move up, put option prices move down. It's hard for us to compete with that. Sure, I could keep moving up to a higher strike price or out to a further expiration date (more time = higher option prices), but then that takes us away from the ideal trade using the ideal strike price. As I mentioned in the commentary above, if the stock prices had been moving lower, we wouldn't be having these issues or conversations. If stocks had been moving lower, It would be more of an issue for me trying to calm everyone down that the option prices keep moving higher and giving us paper losses. In the end, don't look at the open interest or volume as the culprit here. It's the direction of the stock prices. 2. I wish my customer base was larger, but believe me, we're such a small group that we really don't have a long-term affect on the option prices. Sure, in the few hours after I make a recommendation, we might have a small, short-term influence on the price of the put option, but that should be swallowed up pretty easily, especially if the stock price moves lower. As of now, I don't have to worry about limiting the size of our group. We're just not that big (yet!) 3. For our official track record purposes, we use the prices that flow across the tape that I see in the Time & Sales report, plus the fills reported to us by actual Smart Option Seller members. This is truly the most accurate way for us to assess where to mark the official price of the trade. Some newsletter services will take the highest price that shows during the day as their official mark, regardless if any of their readers had attained it. That's not how I operate. If I don't get at least a handful of members with at least a few contracts traded who email me their fills, I won't mark the trade as complete. I of course have to follow the trade if any of our members get filled, but I would prefer to really call it official when more of the members get filled as well. 4. This question has mostly been answered throughout this post, and once again, it's the direction of the stock that will be the biggest determinant of how easily (or not) our members can get filled. I will say, that if you have not signed up for the text alerts yet, please do so. The text alerts will give you a faster head's up that an email from me is on the way. This could allow you to get your trade in faster and possibly get a fill before the stock moves. I hope my answers can help you. Q: Question: I'm considering selling a couple of COVERED CALLS. Do you have any suggestion or rule of thumb to consider as a percentage spread between strike and current price of a stock? A: Hi, I'd be glad to offer my suggestions. Although this is a put-selling newsletter, I want to help everyone become a better options trader, no matter the strategy you like to use. Selling covered calls is another great way to bring extra cash into your trading account. And if we ever get assigned on our put-sell positions, we will be selling covered calls as well against the new long stock shares that we own. So, what's the best strike to pick when selling covered calls? Well, with a stock market that historically goes up over time, you need to be prepared that you may have the stock called away from you if you sell a call strike too close to the stock's current price. You should have a price in mind in which you'd be comfortable selling the stock if it happens to trade at that level. This way, you'll have reached your profit objective. What price would that be? How about a 100% return. Or maybe even a 50% return. I know it's hard to sell a stock only to see it keep moving higher after you've unloaded it. I hate when that happens! But you'll never go broke taking a profit. Set a sell point you're comfortable with and sell the corresponding strike price. You also need to consider what expiration date to choose. This decision is probably a bit easier because the longer the expiration date, the more money you'll receive. Just look at what the same strike will pay you if you sold the 3-month option, the 6-month option, 9-month option, etc. The trade-off is, the more money you receive, the longer you'll have to hold the trade. The stock could potentially reach your strike price if you give it enough time, so it's a balancing act between your sell point versus how much money you want versus how long of an expiration month to use. I would suggest using the probability calculator we have on our site as way to see the chances of the stock hitting the strike price by the expiration date. This can help you decide on the optimal set up. Look it, options trading is all about probability - what's the probability of the stock getting to the strike price by expiration. The more information you have about those chances, the more likely you're going to walk away with a profit. Q: Lee, Here is my update: I wasn’t able to get into BIG and HACK when you originally issued the trades. I did the trade adjustment on BIG and got filled with price improvement at $0.30 this morning. On HACK I went up to the $27 strike and have an order to sell at $.25. I am not yet filled on HACK. Any recommendations? A: As mentioned throughout this alert, the direction of the stock price has been the overriding factor on whether we get filled or not on the put-sell trades. Unfortunately, not everyone was able to get filled on the $26 put option. The best advice here is to let the order sit GTC and see if it gets filled. If the stock drops a bit, most likely it will. If not, you may have to just move on and wait for the next recommendation. It's unfortunate that sometimes not everyone can get in, but let's be grateful that the stocks move in our favor soon afterwards so we can take profits. Well, that's all for today. Have a great weekend! Continue to contact me 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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