After closing the WalMart puts for 5 cents, we waited until a day when WMT was down 1%. We got it Tue and Wed and have a new position that is short three 63 puts, expiring Friday. This position needs to be rolled now, on Thursday morning. We have placed an order to roll this out for one week at 48 cents and subscribers will be getting the price adjustments as we click them lower during the day. We like to try and roll weekly options on Thursday so we avoid getting pushed into the last few hours of a contract. The market makers know that you want/need to roll on that last day, so pricing deteriorates. Sometimes we end up rolling expiring weeklies on Friday, but it’s to be avoided when possible.
The XLP put vertical in the Small Portfolio is now up to 5 contracts at an average price of about 65 cents. The high volatility has raised option prices and this position is showing a loss of $50 on Thursday morning, or just 10 cents per contract. The position is working as expected and volatility should decrease over the next few weeks. The margin requirement in the IRA account is $1000 for 5 contracts. XLP remains as the strongest SPDR, according to our analysis of relative strength.
The market has fallen about 1400 DOW points since the start of the year. We have found that most of the time, when the market comes apart based on things that “might” happen, it overshoots.
Time will tell…….
Stay Optioned, My Friends!