Friday Q&A

Friday Q&A Hello Smart Option Sellers! Before we get to the questions, let's touch on what effect the big move lower in Big Lots (BIG) today will have on our portfolio. I know some of you have concerns, and even just thoughts, on what can happen now that a stock in our portfolio has moved below the strike price. I just want everyone to know that I am here and will be with you every step of the way. I will always answer your questions, especially when things get a little stressful due to market sell-offs. Let's go over some points of interest. Point #1: Stocks can, and will, move lower than our strike price on various occasions, even though we started with a very big cushion. It doesn't happen that often for us, but every once in awhile, we have a move like BIG experienced today. What happened with BIG anyway? BIG announced earnings this morning before the opening bell, and even though some of their numbers beat analyst estimates, other numbers didn't, and it was the less-than-stellar guidance moving forward that really hurt the stock. By the end of the trading day, BIG dropped $9.30 to its current price of $31 per share. That's an extremely large one-day move for a stock like BIG, and it has now pushed below our put-sell strike price of $32.50. The put option price has moved from $.25 per contract just yesterday, to its closing price of $2.85 per contract today. At the moment, that puts us in the red on this position by roughly $2.50 per contract. Point #2: Stocks can, and will, bounce back. Typically after a very large move like what BIG experienced, it will usually have a bounce, as smart investors know that much of the selling was overdone. The adage of "sell first, ask questions later" was on full display. People wanted out, and they sold the stock hard. But as I said in today's earlier alert, the general bearish mood of the market is hurting all stocks. Coupled with a bad earnings report, we can see how BIG probably fell more than it should have. It's scary out there for some investors. The continual volatility, and the large down-moves can ramp up the stress factor. You get that doomed feeling in the pit of your stomach that everything is just going to keep falling and all companies will go out of business. That's how the psyche works when money is on the line - you have images of worst-case scenarios. But we