It's Time To Shut This Position Down
It's Time To Shut It Down Hello Smart Option Sellers! Time to shut down a long-held position in our portfolio - General Mills (GIS). We've been talking about this position in the last few alerts and since they will be releasing earnings next week on June 27 before the bell, we're going to pull the plug now. The stock has been hovering near $45 per share of late, but the put option has stubbornly been staying expensive. With such a short time until expiration (July 18th), this put option should be worth no more than $.05 per contract at the moment. But it continues to hover between $.25 - $.30 per contract. Since we officially sold it at $.28 per contract, it puts us right at breakeven. Here's the deal with why it's stayed so strong - the commercially packaged food sector that GIS is part of has been weak for a long time now. Companies such as GIS, K, HSY, etc, have all fallen over the last two years roughly. With the stock already weak, and the potential for an earnings miss, no one wants to be left without downside protection. This has caused the GIS put options to remain elevated, even with such a short time left until expiration. But know, once the earnings are released, the put options will just evaporate in value if the numbers are good. It will surely be a sight to see. I encourage you to watch these options next Wednesday morning to see how in just a manner of minutes, how quickly the option values will fall. That's assuming the stock rallies. If the stock falls (and depending on how much), the put options will remain elevated. At this point it makes sense to close out the trade and buy the put options back. Even though we could wait a few more days to see if time decay will help, I'm just not liking how it's being played out. I'd rather get out now at break-even and not worry about a potential big drop in the stock. Here's what you can choose to do: Buy back (buy-to-close) all of your GIS July 20, 2018 $40 put options for a limit buy price of $.28 per contract or cheaper, GTC, as a closing transaction (buy-to-close). Currently, this put option has a market of $.24 bid/$.27 offer, so you should be able to get filled at $.28 or cheaper. I hate to close this one down now, especially since the stock is at $45, giving us a $5 cushion above the strike price. But I'm just not comfortable with how it's acting. Better to be safe than sorry. For anyone willing to roll the dice and hang in there through earnings next week, you are more than welcome to do so. Officially, we are closing it out today (and tomorrow if you don't get the chance). Get those orders in there and let us know how you do. That's all for now. Continue to hold all other positions as-is. Contact me here Regards,
Lee Let's Grab That Cash!