Hello Investors,
Today we had a discussion on option pricing. There are two parts, intrinsic and extrinsic value. With this discussion, we showed how our GILD trade is profitable even as the stock has moved against us. With that move, we have decided to “roll-down” our short strike puts. The details for this trade and others are as follows:
Buy to close: GILD June 19th (monthly) 70.00 strike puts
Sell to open: GILD June 19th (monthly) 67.50 strike puts
Limit debit: 0.75
This reduces our max reward from 2.40 to 1.65 overall. It also gives us the potential for a much better cost basis if we end up owning the stock at expiration
Sell short: T -100 shares of stock at 29.15
Buy to cover: T -100 shares of stock with a stop price of 30.60 as a good ’til canceled (GTC) order.
We are targeting the stock to move down to around $26/share in the coming weeks
All orders placed yesterday filled with the exception of our covered call in EEM. We have moved that to a good ’til canceled (GTC) order for this week.
Have a great week!