Trade Results - GPS
Trade Results Hello Smart Option Sellers! Before we get to the results of our GPS trade from yesterday, let me briefly comment on the current state of the market. As you might be aware, President Trump - "Tariff Man" - is at it again. Late yesterday afternoon, he proposed a new set of future tariffs on another one of our biggest trade partners - Mexico. These tariffs are set to begin at 5% and start on June 10. The tariffs will increase to a higher percentage each month until they hit a cap of 25%. Trump is imposing these tariffs on Mexico until they can stem the flow of illegal immigrants coming across the Mexican border into the U.S. Obviously, this news will have a huge effect on the stock market, as it is already slated to open significantly lower. And probably will continue to move lower. Whether the tariffs will solve any of our trade problems is yet to be seen. But it's immediate impact is hurting the stock market - big time. As investors, we try our best to make the most informed decisions on what companies to invest in. We do our due diligence, research, and create a sound game plan. But there are of course things outside of our control that can derail the best laid plans. And right now that is President Trump with his trade wars and tariff hits. As I said in a previous alert, I don't intend for this newsletter to be political. I stay away from that. This is a financial newsletter, and it should be just that. But politics can have a clear effect on the stock markets, and we're seeing that up close and personal right now. It's a factor in our investment decision-making so we have to be prepared for the consequences. And those consequences right now are going to take us out of positions prematurely, and/or require us to make more frequent adjustments. So, we're going to be a bit more vigilant and try to navigate this new normal the best we can. Unfortunately, unexpected losses might result. If so, let's try to minimize them to the best of our abilities. Gap Inc. (GPS) Yesterday we performed a successful roll trade on our GPS put-sell position. The company announced earnings after the bell and the market did not like it too much. Coupled with the new tariff news, the stock is going to move lower by more than it probably should. This morning, the stock is down $3 per share, putting it near $17.50. Let's go over the results. Here's what we did: Bought (bought-to-close) all of the GPS June 21, 2019 $20 put options as a closing transaction (bought-to-close). And... Sold (sold-to-open) the GPS September 20, 2019 $18 put options as an opening transaction (sold-to-open). By the end of the day yesterday, most of the fills came in near even money, meaning, the price that you paid to buy the June puts was the same price as what you received for selling the September puts. We're going to use $1.00 per contract as the official mark for both trades. For the June $20 puts that we closed out, it will lock in a loss of $.74 per contract, based on our official entry sale price of $.26 per contract. For the new September $18 put options, we are obviously going to be underwater at the moment, considering the stock has dropped $3 per share. The $18 put is worth roughly $2 per contract as I type. But, we are in a better position moving forward as we just lowered our risk in the trade by $2 per share. If we end up being assigned on our shares of GPS, we will buy them at $18 instead of $20. Let's see how this plays out over the next few weeks. Hopefully we can get more clarity from our government sooner than later. We will hold off on adding new trades today as we don't want to get caught in any drama that might ensue over the weekend. That's all for now. If anything develops during the day, I will send another update. Continue to hold all other open positions as-is. Contact us here with fills, comments, questions or concerns. Regards,
Lee Let's Grab That Cash!