Trade Update - AMD...And Friday Q&A
Trade Update - Advanced Micro Devices (AMD) Hello Smart Option Sellers! Happy Friday! Our new put-sell play on AMD went off without a hitch yesterday. Between the "Time & Sales" report and your emails, most of the trades went across the tape at $.30 - $.32 per contract, so we'll take the official mark at $.31 per. Great job! Here's what we did: Sold (sold-to-open) the AMD February 15, 2019 $15 put options for an official sale price of $.31 per contract as an opening transaction (sold-to-open). The market had a pretty good sell-of yesterday which worked great for us. Why? Because as stocks sell off, a little bit of panic sets in. This causes investors & traders to pay up a bit more than they normally would for downside protection, which in turn pumps up the volatility of the market, which in turn pumps up the put option prices. Good for us, as we get more upfront premium in our pockets. On the other hand, you may see option prices for our current open put-sell positions pop as well. This just causes us to hold the position a bit longer before we eventually take profits. If you hadn't been filled on some of our older positions, you might have been filled yesterday, specifically on the Kellogg (K) play. And possibly Intel (INTC) & Gap (GPS). Either way, continue to hold all positions as-is and keep all open orders working GTC if you haven't been filled on the others. Friday Q&A Q: Hi Lee, I am enjoying the put selling system very much. However, with the Stock Market moving up for the last 9-10 years, I was wondering how the put selling program would have done during a bear market like 2008/2009. Did you have the program running then, and how did you maneuver it? My concern is that when the market begins to go down, it actually plays into your system of selling puts on those stocks that are moving down. If it is an actual bear market, then eventually we would have to buy those stocks. Now, it would certainly be at reduced prices, but my primary goal is to collect cash, not necessarily build a very large portfolio of stocks. Also, this question relates to the put spreads. I am assuming that all put spreads would be at risk as well. Are there techniques to manage that risk? Would appreciate your thoughts on this issue. A: Hi, as mentioned many times in the past, this is one of the most common questions we get. The idea of investing in the stock market is to watch your portfolio grow over time. In order to grow, you have to be invested for the long haul. So, you have to step in at some point and buy, yes? In the newsletter, we protect ourselves by selling put options that are far out-of-the-money (OTM). This is what gives us margin for error and downside cushion. If we are "put" the stock and forced to buy it, at least we will be buying it at very depressed (and attractive) levels. Then we can watch it rally back up. We started Instant Money Trader (my previous newsletter) in November 2008, as the melt-down was just beginning. Stocks were so cheap at that time that we were able to sell put options with strike prices even further OTM. It was crazy good! We were never forced to buy any shares of stocks because things started to turn around in March 2009. For some of our positions in which the stock price got close to (or below) the strike price, we did employ one of our tried-and-true defensive measures -"rolling" the trades - with much success on a handful of trades. This strategy had us buying back the put options (typically for a loss) and re-selling a longer-dated put option on the same stock at an even lower strike price while collecting an upfront premium that offset the initial loss. We have yet to employ a roll trade with Smart Option Seller, but it's there if we need it. I understand that most of our members are more interested in just collecting the cash and not so interested in buying the stock. I've tailored the service for that goal. But if we do ever buy stock - it will be a good thing. As far as the put option credit spreads - yes, they can move underwater if the stock drops, but since it is a spread, it has a built-in limited risk feature. Hope that helps. That's all for now. 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!