Trade Results - GPS
Trade Results - Gap, Inc. (GPS) Hello Smart Option Sellers! Hope everyone had a great weekend. Before we get into today's alert, I would like to acknowledge all of our U.S. veterans as we honor them today on Veteran's Day. Thank you for your time, service and commitment. Now, let's go over what we did with GPS on Friday. As mentioned late last week, GPS put out an announcement that their CEO Art Peck was stepping down and that their 3rd quarter earnings and rest-of-year guidance would be lowered. This surprise announcement took all the air out of GPS's recent push back above $18 (our line in the sand) and knocked it back down to the mid-to-high $16 range. The timing was unfortunate because with the stock flirting near $18, we were on track to unwind the trade at decent prices before their regularly scheduled earnings report on November 21. If the stock stayed above $18, it would've been a much better outcome for us. But, with the outlook now for any kind of sustained upside move nearly extinguished, it just made the most sense to close the trade down. Here's what we ended up doing: 1. Bought back (bought-to-close) all of the GPS December 20, 2019 $17 strike call option contracts for an official buy price of $1.11 per contract as a closing transaction (bought-to-close). And 2. Sold all the GPS long stock shares at $16.83 per share. Depending on when you entered your orders, your fill prices might've been slightly different. Here are the final results of this long-winded trade: On March 7, 2019, we originally sold the GPS June 2019 $20 put options for a sale price of $.26 per contract. On May 30, 2019, we rolled that trade by buying back the June $20 puts for $1.00 per contract and simultaneously sold the September 20, 2019 $18 put options for $1.00 per contract. On September 23, 2019, we were assigned the shares at $18 per share since GPS stock closed below $18 at expiration. The $1.00 per contract we collected for selling the $18 puts on May 30, was used to lower the cost basis of the long shares down to a buy price $17 per share. On September 23, 2019, we sold the December 20, 2019 $17 call options (covered call) for $1.57 per contract. The Final Results: We locked in a loss of $.74 per contract on the original June 2019 $20 put option. We locked in a loss of $.17 per share by selling the long shares at $16.83 per share. We had a gain of $.46 per contract from the covered call trade. Al in all, we ended up with a loss of $.45 per contract between all the trades. And if you had taken the GPS hedge trade on 8/21/19, you would've had another $.32 of loss tacked on, for a final loss of $.77 per contract. I'd say between all the ups and downs of GPS since we established the trades in March, having only a loss of $.45 or $.77 per contract feels like a giant victory. Of course taking the loss (whether big or small) irritates and frustrates me. I don't like losses, but it's an inevitable part of investing. We'll move on from this experience and continue to find other solid put-sell trades. If anyone did not place these trades on Friday, please do so if you intend to get out. That's all for now. 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!