We were triggered on 3 of the 4 positions at the opening bounce but the afternoon rollover took us back to the entry points.
Now that we are involved in the market it has chosen to exhibit weakness so I am going to raise the stops to take us out early if the weakness persists.
The ATPG position was triggered when ATPG hit $19.50 during the morning rally. I am raising the stop loss to $19.45.
The HES position was triggered when HES traded at $57.75. I am raising the stop loss to $57.25.
The PH position was triggered when PH traded at $53.00. I am raising the stop to $52.25.
The FWLT position was not triggered but maintain the entry trigger until further notice.
We do not sell out of the money puts for a few cents and then hope the market does not correct and cost us a fortune to exit. I don't like to risk a dollar to make a quarter.
The concept for Option Writer is to find solid momentum plays with enough volatility to inflate the option premiums. We will sell in the money naked puts ahead of the stock price and let the stock rally to our strike.
Selling in the money puts allows us to capture nearly dollar for dollar the movement in the stock price.
Because we are selling in the money that same dollar for dollar move can go against us as well. For this reason we establish tight stops to take us out of the play for a loss of a few cents rather than let the losers grow and "hope" they rally again. In a typical month we could get stopped out of twice as many plays as we close for a profit but those stops will be minimal and the winners worth the trouble.
If you do not have the ability to sell options you can turn the plays into spreads by buying a lower strike put. This will decrease your margin requirements but it will also decrease your profits.
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)