Market Update Hello Smart Option Sellers! I know things have been a bit quieter of late as far as new trades go, but let me show you a few charts to get a glimpse of what I'm seeing.
The first three charts above are of the three main stock indices - S&P500, Nasdaq, & Dow Industrials. You can see the incredible "v-shaped" bounce off of the December 2018 lows for all them. Pretty amazing, right? I believe many of us were scared stiff during that third week of December. We all thought this was the end. And just like that, the market bounces. That's how it happens. No rhyme or reason. To me, the market just go too oversold and people bought. It was a good call. But now, with the complete retracement of the drop, stocks are sitting right on that resistance cusp. I'm sure we'll see a bit of a battle here between the bulls and bears. Stocks fell in a big way and now they've come back up in a big way. Eventually we will blast above the line in the sand, but there may be a pull-back before that happens. How big of a pull-back? Hard to tell. But maybe 10%, before the uptrend starts again So how has this recent move affected us at Smart Option Seller? For starters, it's been great for put-sell positions we currently hold in the account. Why? Well, when stocks rise, put option prices fall. That works wonders for our positions as it leads to profits. Secondly, the fourth chart - the falling VIX - tells another tale - option prices are getting cheaper. Why? Because volatility has a direct affect on option prices. The VIX is a gauge of how erratic the stock market is. When the stock market moves consistently in one direction (currently higher), there's not much back & forth or up & down. It's all one-sided. This lowers the measured volatility in the market and that can be shown in a chart such as the VIX. Since volatility helps set the option prices, it is understandable that option prices will get cheaper when volatility falls, and vice versa. At the moment, option prices are falling. This helps with our current positions but makes it more difficult to find new put-sell trades. Between the combination of rising stock prices and falling volatility levels, ideal new put-sell candidates are not popping up at me at the moment. When trying to sell options in a falling volatility environment, you will get less money on those sales. It's better to sell options when volatility is rising. Sure, I have some on the radar, but not quality enough to put our money on the line. I would rather sit on the sidelines than issue a sub-par recommendation. Patience is the name of the game right now. Typically during earnings season we will get a few high-quality stocks that stumble, which offers us great put-selling opportunities. But nothing has really materialized. I won't even entertain such stocks though as Kraft Heinz (KHC) or Stamps.com (STMP), which I covered in one of the previous alerts. Anyway, I just wanted to give you all an idea of what I'm seeing and why it's been quieter than usual for new plays. Safety first! Which also helps with capital preservation. Ok, that's all for now Continue to hold all other open positions as-is. Contact me here with fills, comments, questions or concerns. Have a great weekend! Regards,
Lee Let's Grab That Cash!