Update on Lands End Puts
The current price of the Lands’ End put is below the $1.40 level it traded at when we issued a sell alert this morning. Large price swings in heavily shorted, small cap stocks are not out of the ordinary.
As the Lands’ End numbers were quite bad, I do expect the stock to resume its decline. The one issue to be aware of is that the options expire on Sept. 16. Subscribers holding the put should place a sell order with a $1.00 limit.
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Jack
Have put in my sell order and thanks for staying on top of this.
Jack
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Jon D.
That won’t work today because the time value in the option is 0.40 cents.
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Jon D.
I have been a member of stock charts.com for 11 years now and 1 reason I am bringing this up here is concepts Art Hill has gotten across for members to understand. I go by these ideas. They include before entering a trade we have an idea why we are entering it. Its about taking responsibilities for our actions , and having an exit plan. My sole reason for mentioning this is because I embrace these ideas, and other members of Profit Catalyst should too.
I really wanted the Put on LE to work For Me. It has not, and that is my problem and not your fault is what I am trying to get across. I think the time value is just 0.35 cents now, so clearly I am not getting to receive more than that come tomorrow unless I have a better exit strategy.
Frankly I don’t have one. I am asking if you can make a suggestion based on your years of experience. Although it should have dropped like a stone [it did but just for those controlling it] then rocketed back up. right now charts seem to be saying its going back up clearly someone made $ in both directions here. So maybe we need a spread or maybe rollout to a call.
Id like something better than saying oh well, on 800 bucks I am out as of now. Like I said I take responsibility for being where I am at. I made a bad or simplistic assumption; LE would be down and keep going down. On Saturday I read that small caps have very recently been outperforming ; so this is part of what we see with LE. So how do I turn this around?
Linda McDonough
Jon,
The LE put trade has indeed been incredibly frustrating. The stock has a very high short interest. Almost 27% of the float (shares available for public trading) was short before the earnings report. I have seen this happen sometimes when a very bad number is reported if the stock does not stay down in the first few hours of trading, frustrated shorts cover their positions. The time value of the option as you note, is deteriorating rapidly. I am not putting out any formal recommendation for the options but you could sell the current put at current prices and roll into the December 17.5 or 15 puts as the company should have reported its third quarter by then. Another very risky option is to sell the December 17.5 calls which look to only be in the money if the stock goes above $19.20. Of course your loss is unlimited on selling a call and you can be assigned the option if the buyer of that call chooses to exercise the call. I don’t take any loss lightly and will be issuing a detailed timeline with any other short term option trades. Best, Linda
Jon D.
Thank you Linda for some suggestions which are casual ideas vs a formal rec. I have TOS platform open and will look them over. A big difference with Art Hill suggesting to have an exit plan is he is talking stocks so there might be several ways to deal with that.
But as we know Options are quite different. And what he is saying implies it is a stock you decided to buy on your own. Its rather different when it is a recommendation from a service, to have your own exit plan ahead of time. Mine was as simple as sell them at a profit. I understand its my decision and certainly do not blame you for a weird market its the Presidential election year more than anything else.
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Jon D.
Thought I would mention I did roll Le at same strike to december 16 as suggested. After 1 day it is looking like this is an improvement. It is showing about a 19% gain on the day.
I was just applying a Chandelier exit to a chart and plugged in a Fibonacci retracement. The 62% retracement down and the chandelier exit are very similar in price so it gives me some idea of what to expect. Of course the lead time takes away the need to rush so it may be possible for it to go lower as well. here is a link:http://schrts.co/fCbnsw
the dashed line is the center of the Bollinger Bands at 17.38 which it is heading for. the solid green line is the chandelier exit at 17.10 at this time. The standard strong support line in blue the 50 day Moving average could be broken.
Thanks for a good suggestion.
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Guest User
Any follow up on this trade or are you still sitting at $1.00 limit?
Linda McDonough
Unfortunately the stock has not dropped and the expiration is imminent. As I noted earlier the expiration date is September 16- this Friday so the puts will expire worthless unless the stock drops below $17.50 before then. I would sell half now to at least recoup something.
Linda
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