We exited the BEXP play cleanly and without a loss.

I sent an email around 2:45 recommending we buy to close for $1.00 the short put on the Brigham Exploration (BEXP) position. Until that email there had been no volume in that strike today. Almost immediately there was a surge in trades at $1 so it appears everyone got out cleanly. Our entry price was $1 so the only loss was commissions.

BEXP had been moving up strongly until we enter the position after the Monday dip. It appears investors there were stunned and unlike most of our other positions there was no follow up gain. When a position is not going in our direction I favor a quick exit to preserve mental capital as well as financial capital. Worrying about a failing position creates depression and takes your mind off making new profitable trades. This market is hard enough without adding that load.

The next exit will be ATVI. Like BEXP the ATVI position has gone dormant and we are currently down about 18-cents. Rather than hang on and try to "hope" it up I want to exit the short put side of the position on Friday. I favor holding the long put given the lackluster rebound from Monday's dip.

Issue a buy to close on the $14 short put at the open on Friday. I am not going to say use a limit order since there has been no volume for the last three days. Let's do a market order about 10 min after the open.

Keep the long $12 put on ATVI with a stop loss at $12.25 on ATVI.

Removing ATVI and BEXP should clean up the portfolio an allow us to concentrate on the winners in NOV, MEE, EMN, HIG, CLR and WLT.

Jim Brown



Current Portfolio




Watch List


Conservative

COF - Capital One $32.00 Sell Sept $30 Put COF-UF

BAC - Bank America $16.00 Sell Sept $15 Put BYO-UO

Speculative

   None


Margin Requirements:

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)