The expected profit taking came right on schedule and the tight stop on our remaining play took us out for a very nice profit.
Chipolte Mexican Grill dropped to initial support at the open and passed through our stop loss at $161.75 by 10:30. That took us out of the play with the option at 44-cents for a $1.41 profit.
That was our last position and we are comfortably in cash while we wait for the FED Beige Book on Wednesday. This report has more downside risks than upside opportunities and I don't expect any material rebound before the release.
We are in historically the worst month of the year for the markets. If the Beige Book is negative then I expect the rest of the week to be negative for the markets. Volume should be very light for the rest of the holiday week.
There is no rush to add any new positions until we see what direction the market chooses.
August was a terrible month in the market with nearly an -800 point drop in the Dow from August 9th to August 27th. After a rocky start we ended with a profit on our August positions. It was not much but any profit is better than even a small loss.
August Recommendation History
Click here for July Results
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Click here for October Results
Click here for September Results
Click here for August Results
There are several different formulas for determining margin requirements for naked put writing. These are normally broker specific and some can require larger margin requirements than others.
Here is the most common margin calculation for naked puts.
100% of the option premium + ((20% of the Underlying Market Value) - (OTM Value))
For simplicity of calculation simply use 20% of the underlying stock price and you will always be safe. ($25 stock * 20% = $5 margin)
Prices Quoted in Newsletter
At Option Investor we have a long-standing policy prohibiting the editors and staff from actually trading the individual recommendations in order to conform to SEC rules concerning trades.
The prices quoted in the newsletter are the end of day prices in most cases.
When discussing fills or stops the prices quoted are the bid/ask at the time the entry trigger or exit stop is hit. This is NOT a price that someone on staff actually got using a live order.
For entry/exit points at the market open the prices quoted will be the opening print. The majority of the time the readers are able to get a better fill than the opening print because of market maker bias at the open.
For trades with an opening qualification the prices quoted will be the bid/ask at the time the qualification was met.
All of these rules normally produce worse prices than an active trader would normally get. Because they are standardized there may be some cases where a price quoted was better than an actual fill. If you received a price that was dramatically different than what was quoted just send us an email and we will use your price.