Let's Lock It In
Let's Lock It In - Big Lots (BIG) Hello Smart Option Sellers! We talked on Friday about our current put-sell position in BIG. Our strike price is $40 and the stock's current price is $42. That's somewhat close in terms of do we need to take action? There was a downgrade of the stock this morning before the bell by Raymond James, which prompted the stock to drop about $1 per share in the pre-market session to $41. As I type, the stock has now opened for the regular session at unchanged near $42. But the downgrade has obviously made some investors nervous. The put option expires this Friday, and we would have a week to sweat it out. But do we want to? I like the sector of the market that BIG is a part of. It is in the lower-end retail segment that doesn't seem to have a problem of the Amazon effect. These include such stores as Dollar General (DG), Dollar Tree (DLTR), Five Below (FIVE), etc. My concern is, is that if other brokers add to the downgrades, BIG may have some more downside ahead of itself, so why try to get in front of that? On the other hand, as far as what I'm seeing on the charts here, I feel that BIG is definitely being overextended to the downside and should pop pretty soon. But you also can't underestimate the irrationality of the market at times. It can move a lot longer in a direction which you don't think possible. Happens all the time. So with that, and even though we still have $2 of cushion above our strike price and only one trading week until expiration, I'm going to have us close this position for a smaller-than-usual gain. Here's what you can choose to do: Buy back (buy-to-close) all of your BIG April 20, 2018 $40 put options for a limit buy price of $.15 per contract or cheaper, Day-Only, for a closing transaction (buy-to-close). Currently, this put option has a market of $.05 bid/$.15 offer (just as I said it might in Friday's alert), so we should have no problems getting it done. It has already traded at both $.05 & $.10 per contract this morning, so you are more than welcome to place your bid at $.10 per contract to see if it will get filled at that price. In fact, I urge you to place your bid at $.10 first instead of buying right at the offer price of $.15 per contract. As the day progresses, and If the stock rallies which it looks like it might, then the put option will only get cheaper, so you could very well be able to buy it cheaper than $.15 per contract. Remember, this is a "Day-Only" order, so if you don't get filled by the end of the day, your order will expire and you will have to re-place it again tomorrow. I will also send out an update tomorrow on the trade and remind everyone of this fact. And for those of you who care to hang on for a bit longer, you are more than welcome to see how it plays out the rest of the week. There's a good chance the put option will expire worthless and you'll attain the full profit potential. For us officially, we will be buying the put option back at the instructed price above. Get those orders in there now and let us know if you partake. Contact me here Regards,
Lee Let's Grab That Cash!