The Dow gapped up over 100 points and promptly gave back its gains. Strength in the Nasdaq finally won out and the shorts piled in at the close.

The market gapped up as we expected and any position we would have entered at the open would have been underwater by noon. However, we did not get the dreaded roll over as is common with large spikes over resistance. The markets actually held up pretty well.

The help came from banks and the Nasdaq. Banks rallied on news the Basel accords were not as stringent as expected. Tech stocks rallied on positive chip news from Intel at its developers conference. While Intel's CEO did not specifically give an economic outlook he was bullish about orders for high performance chips and announced some new delivery dates for even faster chips. He also talked about all the new initiatives Intel was involved in and this boosted investor sentiment.

All the good news caused shorts to run for cover again. The Nasdaq 100 actually closed at a new two month high and the S&P tacked on +12 points to close at 1122 and right at the 50% retracement level from the March 2009 lows.

This should cause more short covering and some performance chasing by mutual funds. I want to be long but I am not excited by the days action. It was positive but not a real change in sentiment. The Dow is now up 8 of the last 8 days and should be due for a rest. The futures are negative overnight and that is also making me cautious.

I am going to recommend a few entries off the Sunday list but only if the markets are positive at the open. If they don't open positive then we will wait until they return to positive territory to enter the trades.

Jim Brown



Current Portfolio


No Open Positions


New Recommendations


FSLR - First Solar - $138.84

FSLR was up and down on Monday and closed with a minor gain. Considering the $16 rally over the last three weeks that is positive. Support appears to be $137 followed by $134. Resistance is solid at $140. I am going to speculate on the $125 put.

Enter trade only if S&P-500 is over 1124.

SELL October $125 PUT (FSLR-10V12500) currently $2.23 stop FSLR @ $133.75

Chart of FSLR


WYNN - Wynn Resorts - $90.91

WYNN is closing in on the high set back in August at $94. Profits are up at the casinos and the Chinese economy is growing as evidenced by the +14% report released over the weekend. This should be a good quarter for WYNN.

Enter trade only if S&P-500 is over 1124.

SELL October $85 PUT (WYNN-10V8500) currently $2.23 stop WYNN @ $87.75

Chart of WYNN


AMZN - Amazon.com - $145.07

Amazon is on a roll. The rapid sales of its new and cheaper Kindle have produced a 200% increase in e-book sales. Profits are flowing and the iPad does not seem to be slowing down Kindle sales. Kindles can now be purchased at Best Buy and Amazon's ads are directly targeting iPad users as second-rate e-readers. I am targeting $135 for our put sale and $10 under the current price.

Enter trade only if S&P-500 is over 1124.

SELL October $135 PUT (AMZN-10V13500) currently $2.53 stop AMZN @ $139.75

Chart of AMZN


FFIV - F5 Networks - $98.85

F5 soared on Monday with a $4.72 gain helped by a couple Hewlett Packard acquisitions. I expect F5 to see some profit taking but I think we can sell the $90 put and be relatively safe. The high volatility inflated the put premiums and $90 is well under support.

Enter trade only if S&P-500 is over 1124.

SELL October $90 PUT (FFIV-10V9000) currently $2.10 stop FFIV @ $95.50

Chart of FFIV


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)