Alcoa (AA) Clarification Hello Smart Option Sellers! I'm getting some questions about the AA hedge trade from some members. If you didn't buy any of the April 18, 2019 or April 26, 2019 AA put options as a hedge, then this does not concern you. For those of you who may have bought the April 18, 2019 $25, $25.50 or $26 put options, here's a further explanation: 1. As long as AA stock remains above the strike price you bought, then the hedge trade will expire worthless and you will not have to do anything. It will be a small loss on our part. 2. If AA stock ends up falling below the strike price you bought (moves in-the-money), and it looks like it will remain below the strike as we near the end of the trading day, then you will need to sell the option for its current market price. If you don't, it will automatically be exercised on your behalf which will leave you 100 short shares of stock for each put option that you bought. For instance, if you bought the $26 put options for $.30 per contract, and AA stock moves down to $25.50 by the end of the day, you will need to sell the $26 put option for its going rate at that time, which should be at least $.50 per contract. If you don't sell the $26 put option, it will be converted to 100 shares of short stock at a price of $26 per share. This will be a continued hedge against the July $25 put-sell that we have. If that's a position you would be ok with, then you can just let the shares be exercised on your behalf. But once again, that will only occur if AA stock falls below your hedge trade strike price. Lastly, at the moment, the April 18, 2019 $25, $25.50 & $26 put options have no value. They are offered at $.05 per contract but most likely will not trade at all (as long as AA stock stays elevated here). Keep an eye on AA stock for the rest of the day so you know what you may have, or may not have, to do. We officially bought the April 18, 2019 $25 puts as a hedge, and it looks like they will expire worthless. If they do, we will no longer be protected for any other fall in AA stock after today. If you bought any of the April 26, 2019 put options, then you will be protected for another week. Hope that helps clarify things 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!