The S&P futures were down -9 points late last night but you would never know it from the market close today.
The markets rebounded on better than expected earnings from Citigroup and posted decent gains that took them back to last week's highs.
Unfortunately Apple, IBM and VMWare all reported earnings after the close that disappointed investors. Apple is down -$18 in afterhours trading, IBM -$6 and VMW -$5.
S&P futures are already down over $6 and trading at the low of the session.
The question is now "do we sell the dip at the open on expectations of another rebound or do we wait one more day before entering new positions?"
I scanned about 50 Nasdaq charts looking for afterhours sympathy declines and found several. Even First Solar, which has nothing to do with the tech sector, saw shares decline about $4. Amazon declined -$4 and their earnings are not until Wednesday.
The sympathy declines are the easiest to buy because there was no real reason for them to be down to begin with. However, if the entire market declines in sympathy then it could trigger the long awaited profit-taking event.
After spending quite a bit of time analyzing the potential I decided to add one play tonight and that was First Solar. If we do get a downdraft at the open it should inflate the premiums and FSLR has large premiums anyway. That is why I play it so often.
I will keep watching for a serious dip to buy so we can load up for the next 90 days.
FSLR - First Solar $147.06
First Solar has rallied $11 over the last three days because of an acquisition that will give them a steady supply of the element tellurium. The company being acquired is 5N Plus and 70% of their sales were to First Solar anyway. The company also produces cadmium, selenium, germanium, indium and antimony. All of those are elements needed for solar applications and for batteries.
The improvement in supply fundamentals could help keep FSLR from collapsing with the "other" tech sector.
SELL November $130 PUT (FSLR-10W13000) currently $2.43 stop FSLR @ $139.50
Chart of FSLR
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.