Today's entries did not go quite as we would have liked. The market failed and the Dow lost -140 points.

It was a decent day until about noon. The market opened lower after the futures were up nearly +9 points overnight. For the first couple hours is was just a profit taking session from Friday's short squeeze but it was not to last.

About 1:PM the gloom and doom started settling in and the closer we got to the close the faster the selling became. Basically the Friday rebound did not hold and we are back to support at Dow 10,000. Futures are already down overnight so I am going to tighten the stops and plan to exit on any further weakness.

Jim Brown



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Margin Requirements:

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 please let us know.