Option Investor


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I just want to remind all the subcribers of a blog I sent out to you all last week. It offers much food for thought.

DO YOU REMEMBER THIS BLOG? ( check back a few pages and see if it jogs your memroy.

I recently received a question from a loyal subcriber that may have interest to a lot of you out there.

Dear Mr. Gail:

I have a question for you. After withdrawing some of my equity for
income tax, I am temporarily a little low on margin.
Some of your early spread recommendations have moved a long way in our
favor. Would it be acceptable to close out a couple of the May
positions early at , say a nickel net debit, so I can free up some
equity for either more late May or early June recommended positions?

ANSWER: This is absolutely an excellent idea. A profit is a profit. In addition, you can be sure there will be several times during the year, that 1 or 2 of these trades that we try to squeeze out that last nickel may come back to bite us. Our subcriber brings up an excellent point in regards to profits. Not only does he pocket a profit, but he frees up margin to put on more positions whether recommended plays or supplemental plays. One reason we hold the positions to expiration is that some subcribers feel that closing out the position is costing them not only the $0.05 that the have to buy to cover the position and the commission or transition cost it takes to execute the trade. So for the sake of tracking the ongoing performance the Monthly Cash Machine will show the position result held out to expiration. However we could have an exception where we recoomend a specific position to be closed out early for a profit.

However, like our subcriber has pointed out, do not be afraid to take a profit and run. In some cases you might actually out perform our month's performance if "Murhphy's Law" decides to make an unexpected - "guest appearance". ( which we all should always be prepared for.)

I want to thank our subcriber for his question and I hope his question will remind you all that you do not have to hold all the positions until expiration.

Let us hope that EEM does not come back to bite us!! It would be a shame, as the other positions look to have a very good chance of expiring unless we continued to have down triple digit days for the next 4 days until expiration.

Just a thought to always keep in mind, whether we get through EEM or not, but especially if we do not.

Steve - Keep the faith and keep trading

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