We were stopped out of our last position today before the crash occurred.
We were stopped out of the Goldman position when Goldman hit $144 at 2:21 PM. This was about 10 minutes before the fat finger trade tanked the market. The morning drop did wipe out most of our profit but we did escape with 45 cents.
The market crash today was reportedly a fat finger trade where somebody entered a couple extra zeros in a sell order on E-mini futures and the quantity went from thousands of contracts to millions. This happens routinely but not normally in such a big way.
The market was already strongly negative and moving lower and the bad trade just pushed the selling off a cliff. There were no buyers and no bids once the implosion began. Everyone was in shock with the Dow losing 50 points every 30 seconds once the plunge began.
The good news is that we are setting up for a major buying opportunity this weekend. Friday should open negative and there could be some serious margin selling from the monster decline. By the close there should be some serious short covering and we could have seen the lows for May. It should be a prime opportunity to sell some puts on Monday.
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.