Profit Results
Profit Results Hello Smart Option Sellers! The market was having a very strong day yesterday, but proceeded to give lots of it back by the closing bell. Still ended in the green, but the sellers are still out there, so we need to stay vigilant during this existing volatility. We placed two buy-back trades yesterday, one of which had no problem being filled while the other didn't get enough contracts across the tape for me to call it official. Here's what we did: Hack Cyber Security ETF (HACK) Bought back (bought-to-close) all of the HACK June 18, 2018 $26 put options for an official buy price of $.05 per contract as a closing transaction (bought-to-close). If you had your order in yesterday, then you had no problem getting filled as the market remained at a $.05 offer throughout the whole session. Here are the profit details: We originally established (sold-to-open) this put option on January 2, 2018 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 4.2% in just over three month's time. If you like to annualize, that's roughly a 16% 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 concepts. 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 $2,600 = $520. 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 $520 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/$520 = 4.2%. Also, the fill at $.05 allowed us to capture 81.4% of the full profit potential ($.22 gain/$.27 full potential = 81.4%). 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. Congrats to all who were involved. Merck (MRK) There were maybe 25 contracts that traded yesterday at our price of $.05 per contract and a few so far this morning. As much as I would like to call that official, I need to have more contracts (and members) get filled before adding it to the track record. It won't be long. The order is listed below again for reference. Buy back (buy-to-close) all of your MRK April 20, 2018 $47.50 put options for a limit buy price of $.05 per contract, GTC, as a closing transaction (buy-to-close). Let me know if/when you get filled. That's all for now. 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!
