Despite the strong market open this morning not all stocks on our entry list managed to post gains.
First Solar and Amazon both opened down this morning and did not fill the requirements for a successful entry. The solar sector had some negative earnings news from minor players, which dragged down First Solar. FSLR closed in an uptrend but could not make it back to $140 where it closed on Friday.
Amazon declined from Friday's close at $119 to the high $114s early in the morning but then managed a decent rally for the rest of the day to end up only 47-cents negative.
Neither stock fulfilled the "stock positive" criteria for an entry today.
However, after researching the news on both and looking at the intraday charts I am going to leave Amazon in the newsletter as an active play and we will try again on Tuesday. However, I am changing the criteria to a specific dollar trigger rather than have AMZN go slightly positive at the open then roll over again. We don't want AMZN in the portfolio unless its strength returns.
We want more stocks like CREE which blasted off for a +3.45 gain today.
I am removing First Solar as a play candidate since they have earnings on Thursday. We lost a day and the trend changed so I am removing the potential play.
Check the portfolio graphic for new stop losses on other positions.
AMZN - Amazon.com - $118.40
Amazon dropped from $120 to $100 after its earnings and then fought all the way back on Friday to close at $119. This is a monster rebound and suggests there are plenty of Amazon bulls in the market. The +4 rebound on Monday is further confirmation.
I am picking a strike that is nearly $10 out of the money but still give us $1.85 in premium.
ENTER TRADE ONLY IF AMZN is over $119.50 and S&P-500 is positive.
SELL August $110 PUT (AMZN-10T11000) currently $1.85 stop AMZN @ $114.50
Chart of AMZN
July Recommendation History
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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.