WalMart May 21

WalMart is up today so we are selling calls again. We have sold seven 76 calls (expiring tomorrow) for about 40 cents each. This is a very short term attempt to catch the income available during the last two days of this weekly option series. This is an advanced trade, and is not right for everyone. We still have orders in place to sell two more calls.

Our current Year to Date loss on WMT is about $2000 after adding in a dividend which has not yet been paid. Our position is, once again, a covered call at the 76 strike. We are long the same 900 shares of WMT and short 7 weekly 76 calls. Our daily time decay is over $100.

The plan is to leave the orders in place to sell 2 more calls. This may or may not happen, and we might decide to lower the asking price just to get to a full covered call position on all 900 shares. Overnight, we will collect time decay and then tomorrow we will adjust the position.

There are 3 possibilities for tomorrow.

One: The short 76 calls will drop in value and we will close them for 5 cents then look to sell a different series.

Two: We will roll the short 76 calls to another strike, most likely the next weekly option series.

Three: We will let the position be exercised and have no WMT shares over the weekend.

There is no bias towards either one of those possible outcomes. We will look at the position tomorrow and then decide how to proceed. This will be done early in the trading day because pricing is better early and worsens late in the day. Also, the Friday before a three-day holiday tends to be very slow in the afternoon so we are planning to make our position adjustments unusually early tomorrow.

Stay tuned for the resolution. As always, we will let the market tell us what to do. We can’t predict the market and it is foolish to attempt it. The money is made by learning to accurately interpret the market, accepting facts as they are, and trading with that mindset. The talking heads will attempt to tell you that they can predict the future, but they can’t. No one can.

Stay optioned, my friend.

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