Roll Results - AA

Roll Results - Alcoa (AA) Hello Smart Option Sellers! Well that was impressive. The Dow Industrials had its biggest one day gain ever yesterday - 1,086 points. That's quite a move. But as I alluded to on Monday, it was inevitable that a huge snap-back rally would happen. For the 27 years that I've been a chart reader, patterns like this have been somewhat easy to read. When markets reach an extreme, especially after multiple days in the same direction, whether it's up or down, there's an extremely high probability that it will snap back hard in the opposite direction. This not only relieves some of the pressure, but it reduces the stress anxiety and allows cooler heads to prevail. All of our put-sell stocks had great moves to the upside yesterday, putting downside pressure on the put-option prices. It felt good, right? You might be thinking, "well, did we need to roll?" Yes, because a one-day move certainly does not make for a new trend, but it definitely makes us feel a little better. We need to remain vigilant though because a lot of damage has been done over the last few weeks, and I don't think the bears are willing to give up that quickly. I'm sure we'll see some retracement back lower in the next few days. So, when we're put in a situation where we had to make a decision about rolling our trades, doing so on an up-move makes it that much easier. As noted in the last alert, AA stock had fallen below the strike price, so we needed to take action to defend our position. When executing a roll trade, we substitute our current put-sell position for a different, more conservative put-sell position. This allows us to have more downside cushion, and lower our potential cost-basis if we are eventually assigned on the options. The roll also stretches out the trade to a longer-dated expiration date. This is fine, except now we expose ourselves to extra months of time, possibly allowing the stock to fall even more. When selling options (puts or calls), the less time to expiration the better. But in certain cases (like BIG & AA), we needed to take action, and that's what we did (roll). Let's go over yesterday's results. Here's what we did: Bought back (bought-to-close) all of the AA January 18, 2019 $28 put options as a closing transaction (bought-to-clo