A Surprise Buy-Out Leads To More Profits!
A Surprise Buyout Leads To Profits! Hello Smart Option Sellers! A totally unexpected and great surprise for one of our put-sell positions this morning. As you should know by now, a rise in the stock price leads to a decrease in the put option price - exactly what we want to happen. And this morning we got that big time. Supervalu (SVU) News broke earlier this morning that SVU is being bought out by United Natural Foods (UNFI) for roughly $2.9 billion, and a stock price of $32.50 per share. As of right now, SVU is trading at $32 per share, up $12.50 from yesterday's close. How about that? We currently have a put-sell position in the SVU October 19, 2018 $10 puts. We're going to take this great news and lock in our gains, but we're doing it slightly different this time. I'm going to give you a few different options (pun intended!) to capitalize on this trade. Here's what you can choose to do: Note: If you have this put-sell position in your account, then you will execute the buy-back order today. If you don't have the position, then you can disregard these instructions. Buy (buy-to-open) any SVU October 19, 2018 or January 18, 2019 put options at the highest strike price you can for a limit buy price of $.05 per contract as an opening transaction (buy-to-open). Here's how this is going to work.: Since it's not an absolute guarantee that the deal is done yet until it actually closes, it can always fall apart and SVU could drop in price. Why not take advantage of that and pick up some cheap put options for a nickel in case the deal falls through. Considering that we would've paid $.05 to buy back our position, we might as well buy a better strike price for the same amount and give ourselves an opportunity to score big if the deal falls through. As of now, I'm seeing the October 2018 $25 put options offered for a nickel. You could opt to buy those if you wish. Also, the January 2019 $21 put options are offered for a nickel. You could opt to buy those. Or, you can put in a GTC limit buy order for any higher strike that you wish for a nickel. Regardless of which strike you pick, do not pay more than a nickel. And, only buy the same amount of contracts that you had sold of the October $10 puts. As long as you buy a strike price higher than the $10 strike, you stand to make a profit if the buy-out deal completely falls apart. For the sake of the portfolio though, we'll officially buy back the October 19, 2018 $10 puts for $.05 per contract to close it down. You can choose to do that if you wish too, but my suggestion is to follow the instructions above to give yourself an opportunity to make even more unexpected profits if the deal falls through. Remember, if you have this put-sell position in your account, choose either an October 2018 or January 2019 put option at the highest strike possible for $.05 per contract, using the same amount of contracts that you currently have. I will go over the results tomorrow. That's all for now. Continue to hold all other positions as-is. Contact me here Regards,
Lee Let's Grab That Cash!