Some of us have been assigned on our 42 put EEM options. This has resulted in a long stock position.

 

This will be a three-part adjustment for those who were assigned or a two-part adjustment for those who were not.

 

For those who are assigned, we are showing about a $900 loss on the assignment, minus the credit we received from the rolls. After the trades are closed, I will be able to give you a more accurate cost basis.

 

iShares MSCI Emerging Markets ETF (EEM):  40.17

 

TRADE ACTION 1 (ONLY if you were assigned shares @ 42): If you were assigned shares sell back the long stock position at the market. You can use a limit order but EEM is very tight and usually will fill within one penny of the midpoint. At the time I’m writing this alert, EEM is currently trading at 40.17.

 

TRADE ACTION 2 (ONLY if you were assigned shares @ 42):  If you were assigned: Sell to open the EEM 17 March 40 put for a credit of 0.63 to 0.66

STO the EEM 17 Mar 40 put

 

TRADE ACTION 3 (ONLY if you were assigned shares @ 42): ROLL the EEM 24 February 39 call to the 17 March 39 call for credit of around zero point 0.31-0.38.

BTC the EEM 24 Feb 39 call

STO the EEM 17 Mar 39 call

 

TRADE ROLL

 

For those that were NOT assigned shares of EEM, you will just be rolling the short options.

 

TRADE ACTION 1: ROLL the EEM 24 February 39 call to the 17 March 39 call for credit of around zero point 0.31-0.38.

BTC the EEM 24 Feb 39 call

STO the EEM 17 Mar 39 call

 

TRADE ACTION 2: ROLL the EEM 24 February 42 put out and down to the 17 March 40 put for a debit of around 1.18 to 1.25

BTC the EEM 24 Feb 42 Put

STO the EEM 17 Mar 40 put

 

Once we have accurate prices, we will update the cost basis on the website.

 

Some are probably wondering why we are staying with this trade because the assignments have resulted in some losses. You must remember that this trade is a long-term trade. It is not designed to make money quickly, but it is designed to make money steadily month to month.

 

Just in the time we have been in the trade we have reduced the cost basis from a starting balance of roughly $9.91 down to 6.29 or a 30 to 40% reduction in cost over the four to six months we have been in the trade and that included another assignment. We still have nearly two years left on the trade. 

 

The goal of these trades is that when we finish, we will sell them for significant credits, typically in the $10 to $20 range. When looked at in those terms, we have doubled the money over the time of the trade. 

 

Unfortunately, there will be times that we are assigned when we don’t expect it. This is something we did not expect to see as the trade still had 7 plus days on it and was not that far in the money. However, any American style option can be assigned at any point. Stick with it and you will see the benefits down the road.