Friday Update

Friday Update Hello Smart Option Sellers! Happy Friday! I'm getting this alert out to everyone a bit earlier than usual. Obviously our biggest concern today is our expiring Gap, Inc. (GPS) $18 put option. The stock has dropped a bit since Wednesday's alert and is hovering near $17.50 per share. This gives the put option a value of roughly $.50 per contract. Every tick higher or lower of the stock today at this point will also move the option's price higher or lower in lockstep. If GPS moves up to $18 by the end of the day, the put option will have zero value. If the stock drops to $17, the put option value will move up to $1 per contract. As it looks increasingly certain that the stock will finish below $18 today, the chance of assignment is very strong. Meaning, we will end up buying the shares at $18 per, and you will see them in your accounts on Monday morning. At the same time, your account will be debited for the cost of buying the shares. I mentioned this in Wednesday's alert. Let's go over some possible scenarios today, so we're all on the same page. 1. If GPS finishes below $18, the shares will be assigned. That's a certainty. 2. If GPS finishes above $18, the options will expire worthless and there will be no obligation to buy the stock. That's a certainly. 3. If it looks as if GPS stock will finish below $18 by the end of the day and you have no desire to buy the shares, then you MUST buy the put options back by the end of the day at their going rate. Depending on where GPS stock is trading at the time you execute the buy-back, it will lock in either an overall small loss or gain. 4. Our official move is to take assignment of the shares if GPS remains below $18 at the end of the day, and we will institute a covered call strategy on Monday morning. I will give an update then on how the final profit/loss numbers look for this trade and the prior roll trade. A caveat to all this - if GPS stock rallies today and we're offered an opportunity to buy back the put options for $.10 per contract or less, we will do it. This is a move we probably should've taken last Friday, but I felt good about where GPS was trading at the time and didn't think it would drop back down. Lessons are always being learned, even for veteran traders such as myself. So, stay v