Profit Time, Trade Results, & AA Update
Profit Time! Hello Smart Option Sellers! Coca-Cola (KO) We currently have a put-sell position on KO that has reached the "80% Rule" threshold. You know what that means - time to lock in gains. When the put option price has lost 80% of its value since the day we originally sold it - that's our cue to buy it back. Here's what you can choose to do: Note: you will only execute today's trade if you already hold the put-sell position in your account. If you don't have the position, you can disregard these instructions. Buy back (buy-to-close) all of your KO June 21, 2019 $38 put options for a limit buy price of $0.05 per contract or cheaper, GTC, as a closing transaction (buy-to-close). This put option has traded at $.05 recently and currently has a market of $.04 bid/$.05 offer, so I'm confident we will get filled at our buy price of $.05 per contract. Do not pay more than $.05 per contract. Trade Update - Merck & Co. (MRK) Yesterday we initiated a new put-sell trade on MRK that was not executed by enough members to call it official. There were a handful of trades that went across the tape at our price of $.25 per contract, but that's not enough for me to call it filled. Once again, I strongly urge any of you who are trying to get filled on these trades to not offer a price below my target. Pretty soon after the alert was sent, trades were going across the tape at $.24 per contract. That was below my recommended sell price of $.25 per contract. I'm not saying it was any Smart Option Seller members who were the culprits, but the timing made it suspect. Once someone sells for $.24 per contract (or lower), it sends a message to the rest of the market that there are players who are willing to sell for less-than-ideal. Once that threshold is set, it will be very hard to get filled at $.25 or higher. Don't let that culprit be you! So for now, we let the trade sit and we wait. At this point, MRK stock will have to drop a bit in order for us to have a fighting chance of getting filled at our sale price of $.25 or better. Continue to work your order "GTC". MRK releases earnings on April 30, so we'll see if we can get filled before or after that event. Alcoa (AA) We currently have a July 2019 put-sell position on AA that was rolled from an earlier January 2019 put-sell position. AA releases earnings after the bell tomorrow, so I wanted to give a quick update an where we stand. We locked in a loss of $2.12 per contract on the January position, but sold the July position for $2.90 per contract. If the July put option expires worthless at expiration, we would net a profit of $.78 per contract between the two trades. That is the goal of rolling the positions (to net a gain). At the moment, the July put option is worth roughly $1.25 per contract, giving us a paper gain of roughly $1.65 per contract ($2.90 - $1.25). That's still not enough at the moment to offset the January loss. But considering AA releases earnings tomorrow, I want to offer up another hedge trade similar to the one we recently executed with BIG. AA stock is currently near $27.60 per share. Our put-sell strike price is $25. Obviously some of us are a little wary that AA could produce an earnings dud and drop the stock, possibly back below the $25 strike price. In one sense, why should it matter? If we are comfortable potentially buying AA at $25 per share, then why would we need to take any action to hedge ourselves? Heck, BIG eventually popped higher, and we could've saved ourselves time & money by just leaving that one alone. Maybe AA will do the same (pop higher). Good questions. I agree with myself on that. But, there's always the chance that AA could really produce a dud and drop $5 per share from here, and take it down near $22. So, for those of you potentially worried about that scenario, here is a downside hedge trade that can cover you if AA craps out. Plus, it won't cost too much and negate all of the overall net gain that can be made from the rollover activity. Here's what you can choose to do: Buy (buy-to-open) the AA April 18, 2019 $25 or $25.50 or $26 put options for their current going rates, day-only, as an opening transaction (buy-to-open). Currently, the $25 put would cost $.15 per contract, the $25.50 put would cost $.20 per contract, and the $26 put would cost $.30 per contract. You can choose which one of those put options to buy, or a combination of them. It's up to you. Since we have a net potential profit of $.78 between the rolled trades at expiration, you would only be giving up a portion of that profit by buying this hedge trade. For instance, if you bought the $26 put for $.30, your ultimate net gain from the rollover trades could be reduced down to a net gain of $.48 per contract. We would only know the final amount at July expiration. So, if you feel like having some protection, you can enter this hedge trade. If not, then there's nothing for you to do. Officially, we will be entering the hedge trade with the purchase of the $25 put. Earnings come out tomorrow 4/17 after the bell, so if you are going to enter the hedge trade, make sure you execute it either today or tomorrow. Do not enter it after tomorrow. Ok, that's all for now. Continue to hold all other open positions as-is. Contact me here with fills, comments, questions or concerns. Regards,
Lee Let's Grab That Cash!