Impending earnings and a negative outlook from iSupply suggests we cut and run.
ISupply said this week that a decision by Spain to cut solar subsidies has produced a glut of solar panels that could last until 2012. Applied Materials (AMAT) reported earnings after the bell tonight and did not say positive things about their lagging thin film solar panel business. However, LDK did rise slightly in after hours trading.
Three solar companies report earnings on Wednesday, JA Solar, ReneSola and LDK. LDK reports after the bell. A Barclay's Capital analyst said today that LDK, which reports after the bell, could miss earnings estimates. This caused the nearly 50-cent loss in LDK today.
I had hoped that LDK would have continued the trend higher from last week and be over $12 before their earnings report but as we all know "hope" is not a trading strategy.
I am recommending we close the LDK position at the open on Wednesday. The short August $10 Put DLO-TB is currently quoted at .30 x .40. If we get any follow through on the AMAT bounce after the close I would try to close it for .30 but let's take whatever is offered while it is still profitable. We sold it short for .60 so I doubt we are going to lose money. If we just keep stacking those dimes on the profit side they will eventually add up.
I am looking at several good plays for later this week once we see what the Fed has to say and decide if the two-day decline is going to stick or rebound. Hopefully it will continue through at least Thursday and come to rest on support. That sets up Friday as a short covering rebound day and maybe we can get a couple positions started Friday morning.
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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)