Monday Update Hello Smart Option Sellers! Hope everyone had a good weekend. We have a shortened trading week with the markets closing early tomorrow (Tuesday 12/24) at 1pm EST, and completely closed on Wednesday (12/25). Is there a holiday or something? Lol. These short weeks are great for option sellers like us. Why? Because options lose value whether the markets are open or closed. It also works in our favor as sell-offs can't happen if no one is around to trade, yes? So, it's like making money by doing nothing. Works for me. Monday Q&A Let's hit a few questions. Q: By way of additional information, I have been using my Fidelity brokerage account ever since I signed up with you. It has worked flawlessly, It currently is commission free. Support staff has never failed to satisfy any of my questions, or if necessary to "walk" me through a solution. A: This isn't a question obviously, but a comment on the broker suggestions from one of the prior Q&A alerts. Thanks for passing this along. Sounds like Fidelity is a viable choice. Q: Hi Lee,
The CSX stock price has gone up the past two trading sessions, yet the put option price has not budged. Do you have an idea of why the put option price hasn’t moved lower?
A: We currently hold a CSX put-sell position in the account. If some options have less volume than others, the market-makers in the pits can get lazy and keep their bid/ask markets quite wide, hoping that an uninformed investor (not us!) will pay up for it, more than they should. In due time, the price will come down, as others will start to place their own bids & offers, and the market-makers will be forced to join in. As far as our specific position in CSX, it is getting very close to the "80% Rule" profit-taking threshold. It should only be a matter of days at this point. Q: Lee, I frequently miss the timing on your recommendations and they slip below the recommended price of $.25. I listen to your advice to never purchase below that point and adhere. However if I have missed it and it clearly is not returning to that price point, what is the problem or harm of purchasing at .23 or .22? By adjusting the number of shares I sell to open I can still make the same amount of money from the trade. A: I get it. I do. My hope is to always have everyone filled at $.25 or higher. Sometimes the stock will drop and the put option will pop above $.25 per contract. I don't want you to settle for less than you deserve. But of course over time, the option price erodes. If you truly wish to sell below $.25 per contract, then that is your decision. It's your money and you decide what is right for you. If it rallies back above $.25, then you can kick yourself for not listening to me. Sound fair? But, I don't want everyone to see this as an open invitation to start selling below $.25 all the time. We need to be smart, and believe it or not, if there's a $.25 bid/$.29 offer (for example), trying to sell in the middle at $.26 or $.27 per contract will usually give a fill price. So please try to do that first before immediately selling right at $.25. That tends to scare the market-makers and they will back off and start to show lower bid prices. We don't want that. Ok, that's all for today. Wishing everyone Happy Holidays over the next few days. I'll be spending a few days with the kids, so there might not be another alert until next week. Continue to hold all other open positions as-is. Enjoy! Contact us here with fills, comments, questions or concerns. Regards,
Lee Let's Grab That Cash!