Trade Update - SQ
Trade Update - Square Inc (SQ) Hello Smart Option Sellers! We placed a new put-sell order on SQ on Friday for $.25 per contract that unfortunately did not get filled. There was a 50-lot trade that went through at $.27 per contract right around the time the alert was sent out to everyone, but I haven't heard from any Smart Option Seller members about it. So as of now, we remain unfilled. And with the stock up almost $2.50 per share this morning (yes, $2.50 per share!), it has put our new trade further away from getting filled. Remember, when stocks go up, put option prices go down. Let's give this one another day or two to see if the stock retreats a tad to give us another opportunity. If it doesn't, we may opt to alter the strike price. Keep your orders working as-is. The instructions are below for reference. Sell (sell-to-open) the SQ September 21, 2018 $29 put options for a limit sell price of $.25 per contract or higher, GTC, as an opening transaction (sell-to-open). Market Sysnopsis I've been talking about how the markets were bumping off their 200-day moving averages and how that could help to see a sustained rally. Well, I believe that is happening. And in addition to the 200-day moving average bounce, it looks like both the NASDAQ and the Dow Industrials are popping out and above their triangle patterns (different technical indicators not shown), which is also good news for a sustained rally. If we have another day or two of higher closes, then I believe the upside momentum will carry on and the next upward leg will have begun. This will cause the volatility (VIX) of the markets to relax, and that causes option prices to come down with it. This is helpful for put-sell positions we already have in place, but as mentioned many times before, it can potentially give us a touch less money in our pockets when we initiate new put-sell trades. No worries as we've seen this movie many times before and we've handled it no problem. We're still deep in the midst of earnings season and that can always bring a temporary blip lower for quality stocks that may have an earnings misstep. This gives us some of our greatest opportunities. We only have one position at the moment that is giving us a little grief and that is General Mills (GIS). That stock, in addition to many of the other food & household-related stocks, have just been taking a beating of late. I'm not so sure why, other than some of the ideas I expressed in recent alerts. Stocks such as Hershey (HSY), Mondelez (MDLZ), Proctor & Gamble (PG), Clorox (CLX) & Colgate Palmolive (CL) have all been in a downward spiral. These are all quality stocks and at some point, the selling will end. We're just not sure when. One of the keys to successful put-selling is trying to figure out whether the expiration date of the options will happen before the stock falls through the strike price. Sometimes you have to sweat it out. Currently, GIS stock is near $42 per share and our strike price is $40. Our July put-sell position on GIS expires in two months. Do we think it can stay above $40 for two more months? Hard to tell, but even with the overall markets going up, GIS is still moving lower. We may have to "roll" this trade soon if it continues to look weak. I of course will give full details on that when necessary. On the other hand, you have to think about whether you feel GIS is a stock that's even worth fighting for anymore. The downtrend has been intact for awhile and it hasn't bounced as I thought it should. Do we cut the cord, take our lumps, and move on? Do we sweat it out for a bit more? Or do we roll and extend the trade for a few more months? These are some of the things that need to be addressed, and I will be monitoring this position very closely. Monday Q&A I haven't been getting many questions of late (I must be doing my job!) Q: if you go further out on the expiration the higher the premium since we are using your 80% rule what difference does it make? A: Taking advantage of time decay has always been an option seller's best friend. This is one of the reasons why option sellers opt to take shorter duration trades. "Time Decay" is the process by which an option contract sheds its "extrinsic value" as expiration draws near, regardless of whether the stock goes up or down. The extrinsic value portion of an option sheds quicker as expiration draws near, so focusing on selling shorter-dated options is beneficial for us. Another reason to choose shorter-dated options is because it gives the stock less time to make an adverse move against you. We feel the same. I'd rather use a five-month expiration than a nine month expiration, even if you get a higher premium for the longer expiration. Sure, you could close the trade after a few months with the longer expiration, but that's assuming the stock moves in your favor (higher). Time decay works in your favor whether the stock moves higher or lower, but it works even better on shorter-dated options. If you get the direction right and have strong time decay working for you, then the trade works out so much quicker for you. That's why I opt for shorter-dated trades. Hope this makes sense. That's all for now. Continue to hold all positions as-is. 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!