After a couple days of outstanding gains it is time to tighten stops.

The better than expected economic news led traders to cover shorts into the close and pushed the index close to resistance ahead of the Non-Farm Payroll report on Friday.

Both of our remaining plays are up strongly and we could see some serious profit taking if the payroll report comes in with some negative numbers. I want to raise the stops and take profits ourselves if possible.

I put targets on both positions and raised the stops. Let's hope the news is good and the resulting spike higher takes us out for a nice profit.

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)