The market volatility bit us today with two positions stopped out on the market weakness. Fortunately there was no loss.
Walter Energy (WLT) knocked us out with the dip to our stop at $78.95 this morning. The option was trading at $1.00, which was the same price we entered the trade making it a breakeven.
Wynn Resorts toughed out the morning dip but then gave up ground at the close to knock us out of that position at $88.95 and $1.55 on the option. That gave us a small profit of 53-cents. Not exciting but always better than a loss.
Amazon, F5 Networks and Mosaic are still in rally mode but First Solar lost some traction.
I have mixed emotions about Friday with the S&P back testing support at 1120. As long as that level holds the bulls will be back. Under 1120 and I think we are setting up for a month end swoon. This is going to be a key level.
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.