Sometimes the best-laid plans don't actually work out as expected.
The market may have changed direction today. I know it was down last week but the tone was still positive. Today's 90-point rally on the Dow evaporated and the Nasdaq and S&P finished in the red. This is not a good sign. The rally should have triggered some short covering and finished near the highs if the rebound was serious.
Closing on the lows is a bad omen. This is the first time the market closed on its lows since last Tuesday before the FOMC meeting.
This close could have set the tone for the rest of the week and I don't like it. I tightened up all the stop losses and the next dip should take us out of play.
I am still positive about the market until support at S&P 1175-1190 breaks but that does not mean I want to ride all the positions into deep losses in hopes we will get the expected rebound. I would rather stop out early and then reenter once proven right.
AMZN, VMW and FFIV opened negative and never recovered and in light of today's market I am canceling those plays. If the market begins to rally we will take another look.
Current Position Changes
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.