At 3:30 this afternoon Goldman dropped more than $3 on news the SEC was going to review the timing of the settlement.
Unfortunately the market did not listen to the rest of the press release. The SEC watchdog committee is going to review the timing of the charges and the settlement but they don't think there is a problem with Goldman but with the SEC.
You may recall that Goldman was charged, without any notice, just before the FinReg debates started. They have had settlement offers pending for over a month but it was not until FinReg passed that a settlement was suddenly accepted. The SEC Inspector General David Kotz said the timing was suspicious and his office has been asked by a bipartisan group of Senators to see if there was any wrongdoing.
Unfortunately the knee jerk reactions to the news today knocked $3 off Goldman's price and just enough to stop us out of the position before rebounding to recover almost all of that $3. We were evidently not supposed to profit on Goldman because every time we play it the news related volatility bites us.
The premium at the stop was $2.95 and we sold the put for $1.65 giving us a -$1.30 loss.
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.