Friday Q&A
Hello Smart Option Sellers! With the market having a pretty nasty sell-off today, it looks like most of you had no problem getting filled on today's new trades on GSK & MRK. I'll go over the official results on Monday. Friday Q&A Q: Options with no volume...Example: SJI 04/20/2018 22.50 P the chain screen shows Last trade (0), Change (0), Bid (0), Midpoint 0.33, Ask 0.65, Volume (0), open int (0), the question is there a rule of thumb for a good starting price to sell this PUT at. Should I start at 0.33 or start at a higher price and move down. I use Schwab StreetSmart Edge as my trading platform. A: I took a look at this option chain and it appears it is a very thinly traded contract. You can tell by the extremely wide bid/ask markets (for those options that do indeed have a bid/ask). Some of the others (as you mentioned) don't have much info on them. In order to price these options properly, you really need to have an option calculator handy (you can use this one), and you need to know what the implied volatility skew looks like for each option. The skew is basically the slope of volatility between option strikes. Typically, the lower strikes will have higher volatility numbers while the higher strikes have lower volatility numbers. This can help you gauge what the options should be worth, should you not have much info ahead of time. My book has a whole chapter on volatility and skews. In my opinion, it's probably not worth trading these options because the market-makers will most likely eat you up with those wide bid/ask spreads. If you're intent on trading them, start with high offers and move them incrementally down until someone bites. Q: Any particular strategic thinking in picking the month of July other than it allows one enough time to obtain a good price on a deep in the money option. More specifically e.g. does LLY traditionally trade highr in July? A: This question is in response to yesterday's new put-sell trade in LLY. The reason for choosing the month we do, is to give us enough time that will allow us to use a very conservative strike price that still pays us at least $.25 per contract. I don't like to go much further out than five or six months with the expiration date, and in this specific case, the LLY $60 put option was worth a shot as we could almost get $.25 per contract for it. There's no seasonality with LLY, as far as I know. Q: I am still learning the platform at ib i am sure the answer is in there somewhere in the meantime i know how to ask you when I put a trade on i get a pop up notice exceeds percentage constraint of 3% what does that mean A: If you are using IB (Interactive Brokers) as your broker, you might get a message like that from time to time. I get them too. It really doesn't make much sense to me, but that notice is just telling you that the price you're trying to trade the option for is outside of some arbitrary percentage that IB seems to use. If I'm comfortable with the price I'm trying to trade the option for, I just hit the "override and transmit" button. You should see that button on your screen too. Yes, you can still try to chat online with them if you're still concerned. Q: How many Smart Option Seller subscribers are there? Certainly if the number is large, the volume of trades will move the needle before all subscribers are filled. That's been my experience. If I don't get a trade placed within 15 minutes of your email, the odds of getting filled are significantly reduced. A: I can't divulge the number of members we have, but trust me, it is pretty small as far as mainstream newsletter go. We're one small happy family! Sure, any flurry of orders can move a market no matter who you are or what market you play in. But this should always be temporary though. I touched on this subject in the earlier alert, about how the stock can move very rapidly upwards after I issue a new trade. This seems to be the culprit more than anything else, as far as causing us not getting filled on the put-sell. Timing is critical sometimes, and like I said, I'm looking for stocks ready to move higher. Well, that's all for today. Continue to hold all other positions as-is and continue to work all other unfilled orders. 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!
