Market Update Hello Smart Option Sellers! How do you like this snap-back rally? Pretty impressive. These "v-shaped" recoveries always amaze me because they seem to come out of nowhere at a time when no one is expecting it. That's what makes them so powerful. When everyone is leaning too heavily on one side of the market (short side), that's how the rebound is so severe - because everyone who sold short is now scrambling on top of each other to buy back their positions. This creates a domino effect which creates the fast v-shape. The catalyst this time? The Federal Reserve saying it might start to lower interest rates again. And soon. That kind of action from the Fed creates a floor under the market which gives investors a sense of security that the selling will be always buffered. We call the Fed "PPT" - Plunge Protection Team. They swoop in at times of turmoil to reassure the world that the markets are safe and will soon rise again. Over the long run, if you are an investor, this will work wonders for your portfolio. You just need to have faith (and balls) to stay the course and buy the dips. Eventually, you will come out way ahead. On the other hand, if you're "saver" and feel better keeping your money in the bank, then this environment is not the best. Although, very short-term CD rates are pushing 2.3% these days. That's fantastic, compared to where they've been over the last 10 years. If you have cash sitting in the bank, make sure to compare the "normal" rate paid on your savings versus putting into CDs. I've been personally rolling 1-month CDs on some of my free cash. With the current yield inversion, short-term is where it's at. I had a new trade lined up for us on Tuesday, but the rally was too much and knocked the put option prices down. I'll keep looking, but we might need to wait for another small pull-back. Anyway, we're on the sidelines at the moment watching our current put-sell positions move in our favor (even GPS & INTC). Continue to hold. Received a quick question about our GPS "roll" trade from last week. A reader wanted to know if anyone had their GPS $20 puts assigned before rolling to the $18s. Not that I'm aware of. In most cases (99.9% of the time), option contracts will not be exercised before expiration, even if they're in-the-money by a large amount. Why? Because the option buyer doesn't really have an incentive to exercise early. As long as the stock keeps moving lower (in GPS's case), the put option buyer has an asset that's increasing in value. They don't need to exercise it in order to reap that value. They could just as easily sell it back to the market if they wanted to. So, just because GPS stock fell down to $18 doesn't mean anyone holding the $20 put-sell would be assigned. Make sense? Well, that's all for now. Continue to hold all other open positions as-is. Contact us here with fills, comments, questions or concerns. Have a great weekend! Regards,
Lee Let's Grab That Cash!