Friday Update Hello Smart Option Sellers! Sorry for the late alert. We're gotten plenty of fills that went across the tape on our new Alcoa put-sell trade that I issued earlier today. I'll have the official results on Monday. Let's go over a question that came in the other day and then I'll give an update on the status of the option credit spread service we've been mulling over. Q: Hello Lee, I hope you are doing well. Hey, I just wanted to drop you a line about the option pricing. I've just been with you 2 or 3 months. I'm enjoying the service and how you run it. I actually admire the restraint to not have been jumping in the market over the last month or so when there is clearly no reason to initiate a new trade. But I did want to comment that I've had a hard time getting filled at your prices. I realized that timeliness was probably important so I have set up my email to send me a text whenever you send an alert to prompt me so that I might have more timely executions. But today, even though I was able to be in front of the screen within 30-40 min of the alert (and the price of NKE had declined an additional 0.5% in the meanwhile), the price of the put was 0.23/0.25. I make all the orders GTC and of course don't mind missing a few trades. I have the discipline to not chase the price. But it does strike me that there's not much wiggle room with your prices. Perhaps a little more cushion in prices (ie, letting bid be $0.28 but using $0.25 as subscriber limit, for instance) would enable a few more fills. Otherwise, I'm coming to expect that I may not be able to participate in more than half of the trades. I can usually get an order entered within an hour of the alert -- sometimes sooner. It may just be that you have enough of a subscriber base that you're moving the market before I can pull the trigger. I wonder if otherwise putting in a couple of different options would enfranchise a broader participation? So instructing your base to sell -- using today's example -- the 60 put for 0.25 or the 62.5 put for $0.34. I understand that in some instances you may select strike price exactly at some technical level that such a strategy might violate, but doing so might allow your subscribers more fills with very comparable outcomes in the aggregate. Obviously, in the example above, one could lessen contract size in the latter option to mitigate total exposure (and margin, if that were an issue). Anyway, I've seen this enough in my initial few months with you that I wanted to let you know. A: Thank you for the comments. Obviously by now you've seen how patience can pay off in situations like this. With the market rout over the last week, many of our put-sell positions have not only popped back up to the original sell price, but have surpassed them, as well. This has probably given many of you an opportunity to get into trades which at first you might not have thought you'd have the chance to. The pricing that you mention in your question is a very common issue that we encounter when stocks are in a continual uptrend. We receive the same question, mostly from newer members who are having trouble entering the trade fast enough before it moves out of range. This is why I always write about hoping for periodic pull-backs in the market. Not only is it healthy for the market, but it allows Smart Option Sellers the opportunity to get involved with the trade. Of course I never want any of my members to feel frustrated about the lack of opportunity to enter a trade we recommend. You will come to see that I do try to give a little leeway on the pricing of our trades. I'll typically instruct everyone to sell the put option for $.25 per contract or higher while it's currently trading for $.28 per contract. This way, you'll be able to sell it for $.28 or $.27 or $.26, and then at a minimum $.25 per contract. Regarding the Nike trade - obviously the point is moot at the moment, but I have always given my readers the choice to pick any other strike they want, if it meets their risk parameters. And we have plenty of readers who do, as they write me all the time. Don't feel pressured to only use the strike I choose. It's your money and you can pick whatever you want. But I will only officially follow the trade I recommend. Over time, you will find that you'll be able to enter the trades I choose. Sometimes it may take a couple of days to happen. Other times you won't get filled at all. And yes, it's also true that when we have a rush of orders at the same time, it can temporarily push the option prices down. But this is very temporary. We are not a big enough group to sway the entire market. Just know I'm here trying to give everyone the best opportunities to make a profit. That's my goal and promise to you! New Service? Based on all the feedback I've received, it looks as though we are a go to start up the new option credit spread trading service. I know some of you still have questions about it, and I will try to get those answered in upcoming alerts. For now, here are some details: 1. This will be a put-option credit spread trading service only. No call-option credit spreads. The reason being? The market tends to go up more often than it goes down. This allows put-option credit spreads to make faster profits since it benefits from upwards stock movement. 2. I will offer an add-on service to The Smart Option Seller newsletter where I will give a bonus spread trade using the same stock as we do for the put-sell. You can decide to choose this add-on or not. I have not decided on the final price yet, but most likely it will be $295 per year. No monthly plan on this one. 3. The full-blown credit spread service will employ the use of many different stocks (all high quality!) - which means our hands won't be tied anymore because the price of the stock is too high. This will allow us to enter many more trades, as long as conditions are right. 4. The price of this service will most likely be $895 per year or $99 per month. You choose. This will be the new member price for all existing customers. The price WILL go up when I open it up to the general public. This is an incredible bargain considering the sophisticated nature of the strategy and the opportunity for more trades compared to the straight put-sell service. 5. The biggest benefit to engaging in option spreads is the reduced margin requirement as the risk is limited and capped to a finite number. This can help put your mind at ease especially during nasty sell-offs like we're currently undergoing. In contrast, when selling naked put options like we do in The Smart Option Seller service, there is theoretically unlimited downside risk, and potentially fluctuating margin requirements. Please re-read Alert #304 from September 25th (check the Archives on the website) to give you a really good idea of how one of these spread trades would work. 6. The one thing that naked put selling does offer though is the huge downside cushion. This is how we've been able to achieve a 100% win rate since inception. With the credit spreads, you will have to choose strike prices closer to the current stock price, thus giving less downside cushion. Always a trade-off! Regardless, I feel confident that we can achieve great success with the spread trades, in addition to keeping our high win rate with the naked put-sells. Here's a quick preview of the name:
Vertical spreads is the technical term used to describe the type of option spreads we will be engaging. 7. Lastly, I foresee the service launching by end-of-year, or just after the new year, depending on how busy I get and the time it takes to set it up. Well, that's all for now. Send me any other questions you may have about anything on your mind. Continue to hold all other positions as-is. Have a great weekend! Contact me here Regards,
Lee Let's Grab That Cash!