The market rested on Monday and the S&P never made it to positive territory.

That means none of the short term plays were triggered. The qualification was for the S&P and the individual stock to be positive.

We had some interesting moves today. The opening dip in the market increased the premium slightly on the index plays and both indexes finished at the high for the day. So far, so good.

On the stock plays Walter rambled for a $2.60 gain and forced me to change the strike price for tomorrow's attempted entry to $90 from $85.

PCP went the other direction with a $4 loss. The only news I could find was a new strong buy recommendation by S&P that came out at 3:16 PM. After a lot or research and coming up with no clues I am going to retain the PCP play and hope for an entry on Tuesday. I think it was just due for some profit taking and the drop in Boeing, a large customer of PCP, was the contributing factor.

Same game plan for Tuesday. Market and stock must be positive before making an entry.

Jim Brown



Current Portfolio




Current Position Changes


None


New Recommendations


DECK - Deckers Outdoor $62.66

Deckers garnered an upgrade from Barclays to overweight on Friday. That came on top of news on Thursday of S&P moving them from the SmallCap 600 to the MidCap 400 index at the close of business on November 10th. This pushed DECK to a $3.73 gain on Friday.

I am worried some of that gain may erode so I am recommending the $55 put. The inclusion into the madcap index should provide support.

Enter this position ONLY if the S&P and DECK are positive.

Sell DECK DEC $55 Put (DECK10X5500) currently $1.05, Stop $59.50

Chart of DECK


PCP - Precision Cast Parts $141.13

PCP is on a mission and since earnings were released that mission has been to add dollars to its stock price. PCP produces many of the parts in the 787 Dreamliner as well as other planes, cars and machinery of all types. PCP has been catching upgrades almost weekly on increasing business and decreasing debt.

Enter this position ONLY if the S&P and PCP are positive.

Sell PCP DEC $135 Put (PCP10X13500) currently $1.50, stop $138.25

Chart of PCP


WLT - Walter Energy $98.33

Walter blasted off last week despite missing earnings estimates by a couple cents. The republican win means that cap and tax is dead for another two years and coal demand will continue to rise.

Also helping the performance was a +106% increase in sales of coking coal driven by higher demand for steel.

Enter this position ONLY if the S&P and WLT are positive.

Sell WLT DEC $90 Put (WLT10X9000) currently $2.21, stop $94.50

Chart of WLT


NTAP - Netapp $55.97

Netapp's chart has been moving from the lower left to the upper right for quite a while and Thursday's market rally added $2 to that chain of gains.

Even though NTAP has been moving progressively higher it has been at a moderate pace and the trend could continue.

Earnings are Nov-17th so we need to be out of this play before that happens.

The $50 strike is 10% below the current price so it would take a serious decline to cause trouble.

Enter this position ONLY if the S&P and NTAP are positive.

Sell NTAP DEC $50 Put (NTAP10X5000) currently $.95, stop $54.50

Chart of NTAP


New Long Term Recommendations


None


Aggressive Recommendations


Coming later this week!


October Recommendation History



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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.