Profit Update - Overstock
Profit Update - Overstock.com (OSTK) Hello Smart Option Sellers! We just locked in our first profitable trade of 2018. Those of you who held the put-sell position on OSTK were able to get filled yesterday on the buy-back order at our price of $.05 per contract. Here's what we did: Bought back (bought-to-close) all of the OSTK March 2018 $15 put options for an official buy price of $.05 per contract as a closing transaction (bought-to-close). At this point, the put option still has a market of no bid/$.10 offer, so that tells me anyone who needed to buy this put option back at $.05 has currently done so. Congratulations to those of you who were involved with this trade. Here are the profit details: We originally established (sold-to-open) this put option on December 8, 2017 for a sale price of $.27 per contract, and now we took gains by buying it back (bought-to-close) for $.05 per contract. With the fill at $.05, it locked in a gain of $.22 per contract ($22 for every contract traded) and a return on margin (ROM) of roughly 7.3% in under two month's time. If you like to annualize, that's roughly a 44% return. To understand how the margin works and the calculations involved, here's the breakdown: Whenever we sell an option contract, your broker will require you to maintain a "margin requirement". The margin requirement is made up of funds that are already in your account and will need to be held aside while the trade is active. You are not borrowing money from anyone nor are you paying interest to anyone. Some people can confuse the margin requirement with "trading on margin". They are completely different things. We are not trading on margin when selling put options (read my margin primer in the members-only section of the website). 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 $1,500 = $300. Your specific margin requirement at your broker may be higher or lower than that. If you are unsure, just ask them. So for this trade, our margin requirement is $300 per each put option contract sold. Our profit on this trade turned out to be $22 per each put option contract sold. Hence, the return on margin (ROM) comes out to $22/$300 = 7.3%. Also, the fill at $.05 allowed us to capture 81.5% of the full profit potential ($.22 gain/$.27 full potential = 81.5%). When selling options (puts or calls), your full profit potential is capped at what you initially sell the option for. In this case, that amount was $.27 per contract. We like to close trades early (buy-to-close) before expiration when we can capture at least 80% of the full profit potential. This is called my "80% Rule". Locking in early wins is just smart money management and it allows us to free up cash to put towards new trades. That's all for now. Continue to hold all other positions as-is and continue to work all other unfilled trades as-is. And for some of our newer members, our position in Kellogg looks to still be viable for new entries, and we continue to keep an eye on our unfilled position in Southwest Airlines. It's so close! Check the current portfolio below for all instructions. 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!