Trade Update - Kellogg

Trade Update - Kellogg (K) Hello Smart Option Sellers! We placed a new put-sell trade yesterday on Kellogg. I was very excited about this play, and with the stock trading lower throughout the day, I was very confident that we'd be able to sell the put option at our recommended price (lower stock = higher put option prices). Well, it didn't exactly work out that way. Talk about frustrating. Even with the stock moving $1.90 per share lower late in the day, the $52.50 put option just would not budge from the $.20 bid/$.25 ask market. I almost couldn't believe what I was seeing. In my opinion, we should've been able to sell the put option for at least $.30 per contract (instead of $.25), as the stock kept dropping lower. Right now, the market on the put option should be $.25 bid/$.35 offer. Here's a screenshot taken right after the open this morning of the Kellogg put options for June 2018:

With the stock trading at $66.68, which is already $.34 lower on the day, you'll notice both the $50 put options and the $52.50 put options have the same exact bid/ask market of $.15 bid/$.25 ask. You know why that's ridiculous? Because the $50 put options, which are $2.50 more out-of-the-money than the $52.50 put options, should not be trading for the same price as the $52.50s. This means that either: A: The $50 put options are priced really high Or B: The $52.50 put options are being artificially held down in price. I'm going with choice B. As I said above, the $52.50 puts should be at least $.25 bid/.35 ask, but the options market-makers are being stubborn with us. I can almost make a guarantee that when/if we're filled at $.25 per contract, you will see the market on the $52.50 puts immediately go to $.25 bid/$.35 ask. Also, it's not like we have thousands of contracts flooding the market keeping the prices subdued. I think there was maybe 600 contracts offered at $.25 (mostly us I'm sure), which is like a grain of sand on a whole beach - extremely small potatoes. And even the open interest level - which some of you ask me about - was at a respectable 1,200 contracts before we even joined the party. I'm not a big believer that open interest plays a part in our ability to get filled, but even so, this put option had a decent amount of contracts already open, so liquidity is there. But yet, the option market wouldn't budge and fill all of us at $.25 per. In the end, there were about 50 or so contracts that traded at our price of $.25, some of which were filled by Smart Option Seller members. We'll follow the trade now but I know many of you weren't filled yesterday. Let's keep our orders working "GTC" for the time being. I'm not sure I want to move up to the $55 put strike just so we can get a fill price, nor am I wanting to sell the $52.50 put option for less than $.25 per contract yet. I'm hoping that K stock can fall a touch more which should give the options market another chance to fill us. Here's what we did: Sold (sold-to-open) the K June 2018 $52.50 put options for an official sale price of $.25 per contract as an opening transaction (sold-to-open). Some of you asked about which of the other strikes you can sell if you wish to do that. If you decide to go against the grain and choose a different strike, I would only suggest going one strike higher. In this case, it would be the $55 puts. I would rather have strike prices at $1 increments instead of the $2.50 or $5 increments. Moving up to the $55 strike in my opinion is a big jump. That's a $2.50 move. I'd feel more comfortable if the strikes were at $1 increments, but you can decide what is right for you. For now we wait and see and whoever hasn't been filled yet, keep working your order GTC. That's all for now. Contact me here Regards,

Lee Let's Grab That Cash!

Recent Posts
Archive

THE SMART OPTION SELLER

©2016-2020 Smart Option Seller                Lee Lowell