Let's Try To Sneak In A New Trade
New Play! Hello Smart Option Sellers! I mentioned earlier in the week that I had some new plays on my radar and that they are reporting earnings next week. I also mentioned that making a new trade before an earnings announcement can be a boom or a bust. I certainly don't like busts, but I think trying the trade now just might be worth it. Emerson Electric (EMR) Last May 3, 2017, we entered into a put-sell play on EMR right after their earnings were announced. At the time, the stock was around $59 per share and we sold the September 2017 $45 puts for $.20 per contract. Today, EMR stock is at $67 per share ($8 higher than last year at this time), and we can still possibly sell the September 2018 $45 puts . The key is, they release their earnings next Tuesday on May 1st before the bell. Do we want to make a new trade right before earnings? What if EMR reports a dud and it drops $5 per share? Well, this would usually be a reason why I would opt to err on the side of caution and not take the trade. But since we have an $8 cushion built in compared to last year's scenario, I believe taking the trade would be worth it. EMR is one of the most solid blue-chip Dividend Aristocrats there is. What's that? A Dividend Aristocrat is a stock which has increased its dividend payout every year for at least 25 years. EMR has been doing that for an incredible 61 consecutive years now. That's quality! So, we're going to try to get the trade done, but the caveat is, is that I want everyone to play with half their usual trade size. If you typically sell ten put option contracts, then I want you to only sell five. If you only trade one contract typically, then just stick with one contract. The implied volatility (IV) of the options usually ramp up in the days leading to the earnings announcement, which has the effect of making the options more expensive. That works in our favor as we can get more money when selling them. After the earnings are announced, the IV driops, taking the option prices with it. So I want us to take a stab at selling half our usual share while the options have a bit more juice in them. Here's what you can choose to do: Sell (sell-to-open) the EMR September 21, 2018 $45 put options for a limit sell price of $.25 per contract, GTC, as an opening transaction (sell-to-open). Currently, this put option has a market of $.20 bid/$.30 offer, so let's see if anyone will bite at $.25 per. We may not get it today or Monday, but let's at least give it a try. If we aren't filled by Monday's close, we will cancel the order as it won't make sense to keep it open for Tuesday when earnings are announced. I will send an update on Monday as well. Bristol Myers (BMY) For anyone holding the unofficial strangle trade on BMY - the trade will expire today. Currently, BMY stock is at $52.20, and at the moment, the strangle is only worth a few pennies. If BMY remains in between the strikes you bought of $48.50 to $53, then the strangle will expire worthless and you won't need to do anything. The trade will disappear from your account. But if the stock jumps above $53 today, your $53 call option will have value and you'll need to sell it out and collect the prevailing value. Don't forget to watch it if you hold the position. That's all for now. I haven't gotten any questions this week so no Q&A today. And how about Amazon jumping $100 per share after earnings? Pretty amazing. Have a great weekend. 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!