Normally, I’d wait until the third week of November to issue the monthly options update. But just like last month, I am closing out two of our short put positions early due to extreme stock market volatility. This time, my specific concern is that the outcome of next week’s midterm elections could trigger another wave of selling if Wall Street doesn’t like the result.

Of the three options expiring, two of them are presently out-of-the-money which means we can buy them back for pennies on the dollar while also eliminating the possibility of having them put to us if they take a downward turn over the next two weeks.

For those reasons, I am closing out our short put options positions in Macy’s and American Electric Power today.

In July, we sold a put on Macy’s (NYSE: M) at a $35 strike (Symbol: M181116P00035000) for a minimum price of $3. At yesterday’s close, we could buy that same option for less than 50 cents for a better than six-fold return on investment. 

[Editor’s note: the price cited above is incorrect; however, we still recommend closing out this position by the end of this week albeit at a lower ROI than originally stated. We apologize for the error]

During the third week of August, we sold a put on American Electric Power (NYSE: AEP) with a strike price of $70 (Symbol: AEP181116P00070000) at a limit price of $1.50. That same option could be bought at yesterday’s close for 35 cents, or less one-fourth what we sold it for.

As for our third position expiring in November, Western Union (NYSE: WU) is scheduled to release earnings after the market closes tomorrow (November 1). We sold that put at a $19 strike (Symbol: WU181116P00019000) for 80 cents, and yesterday the stock closed at $17.87 so we presently have a loss on it and are at risk of having the stock to put to us if it does not rise above $19 by expiration.

I am not yet closing out that position and will issue an update on WU this Friday after evaluating its Q3 results.

Like last time, if you decide to ignore this alert and hold on to your M and AEP put options through this month’s options expiration date (November 16), I suggest you keep a very close on the stock market and have an exit strategy in place in case things start to get ugly.