We are going to use a news event to add another play for Monday morning.
On Friday Potash (POT) guided higher for the first quarter saying profits could be at record highs because of a sharp increase in U.S. and global demand. POT raised the top end of its guidance by 50% to $1.50 from $1.00. That $1.00 guidance was only six weeks old.
POT and the fertilizer sector in general have always produced some high premiums because of the high volatility. If premiums hold at the open on Monday we could add a relatively risk free $2 for a put that is more than $10 OTM.
We are having a pretty good month but there is likely to be some volatility next week because of the Fed meeting. The April option premiums should begin declining quickly as they become the front month after this March expiration next Friday.
Check the play graphic. Many stops have changed.
FDX - FedEx
Put in a bid to buy back the option at 10-cents or less.
Maintain stop loss at $84.75.
POT - Potash $125.37
POT raised guidance by 50% and had good things to say about the global demand. The stock spiked +8.34 to close at $125.37. POT was already in an upward trend so I doubt those gains will be reversed completely although I would expect some profit taking.
I am going to suggest the April $115 put just under current support.
SELL POT APRIL $115 PUT (POT-10P115) currently $2.53, stop POT @ $119.
March Recommendation History
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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)