Another Retail Position With DG Dear Savio, We closed our original position in Dollar General (DG) last week following the company's earnings report. We wanted to give traders a day or two to settle down on valuations, and we needed time to review upcoming economic data. At this point, we feel confident about moving back into the trade with a new short put position. We recommend you… 'Sell to open' the DG September 18th $200 Put Write (DG200918P00200000) for a minimum price of $4.20. From a fundamental perspective, our worries that the stock might suffer from U.S. tariffs on imported goods were overestimated. The potential risks have been offset by strong consumer demand and a very competitive position in the discount retail sector. We expect DG to remain defensive if there are any short-term corrections in September. The stock's technicals look good as well. Although earnings day on Aug. 27 was a little volatile, support is still intact, and the consolidation in the $200 per share range still has a bullish bias for the eventual breakout. 
The only issue we have with DG is that its options are not the most actively traded in the market. As a result, the spread between the bid and ask prices can get a little wide. Our recommendation is based on what we believe is a fair mid-price between the bid and ask. Traders will need to use a limit order to get that price. That means, we may need to be patient about getting a fill, which could take from a few minutes to an hour or more before the market will be willing to meet our price. Here's How the Trade Can Work Out…
Instant income: With this put sell, we plan to collect an instant income payment of at least $420 per contract.
Put expires out of the money: If DG's stock price remains above our $200 strike price at expiration on Sept. 18, the puts will expire worthless, allowing us to keep the $420 per contract we receive for selling this option. That's a return of 10.07% in just 18 days, or an annualized return of 600.14%.
Put expires in the money: If DG's stock price is below our strike price at expiration, you will be "put" 100 shares of DG at a cost basis of $195.80 ($200 strike price – $4.20 option premium). That's a discount of 3.61% below the current market price.
Taking possession of the shares will then allow us to write covered calls against the stock for additional income.
If you do not want to take possession of the stock, you will need to "buy back to close" the put before expiration on Sept. 18.
We'll keep you posted as the trade progresses. | Dollar General (DG) common stock was trading for approximately $203.13 per share at the time of this alert. Long-Term Focused Strategic Positions: Right now, we only recommend selling the following covered calls or puts if you are already holding a long or short position in the underlying stock. We are not recommending our stock positions for new entries at this time. If you haven't already entered the following and can still get in for a price at, or better than, our recommended minimum/maximum, we still recommend entering: - Covered Call: (Short) BAC September 18th $25.50 Covered Call (BAC200918C00025500) for a minimum of $0.75.
- Covered Call: (Short) BLL September 18th $77.50 Covered Call (BLL200918C00077500) for a minimum of $1.70.
- Covered Call: (Short) KO September 18th $49 Covered Call (KO200918C00049000) for a minimum of $0.30.
- Put Write: (Short) ATVI September 18th $77.50 Put Write (ATVI200918P00077500) for a minimum of $2.05.
- Put Write: (Short) GLD September 18th $180 Put Write (GLD200918P00180000) for a minimum of $3.30.
We are still holding the following strategic trades, but either the current value of the short option or the price action of the stock itself doesn’t warrant entering a new trade at this time. If you haven’t already entered these trades, we recommend waiting until further notice before opening a new position: - Covered Stock: Ball Corporation (BLL) common stock -- part of the BLL covered call position.
- Covered Stock: Bank of America (BAC) common stock -- part of the BAC covered call position.
- Covered stock: Coca-Cola Company (KO) common stock -- part of the KO covered call position.
- Long Stock: Cisco Systems (CSCO) common stock for a maximum of $56.00.
- Short Stock: iShares Investment Grade Corporate Bond ETF (LQD) common stock for a minimum of $128.00.
- Short Stock: Wynn Resorts (WYNN) common stock for a minimum of $55.00.
If put-writes and buy-writes are new strategies for you, be sure to check out our Resources page for more information. For more on these trades, be sure to attend our next weekly webinar Wednesday at 8 p.m. ET. Sincerely, 
John Jagerson and Wade Hansen
Editors, Strategic Trader
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