That sounds like a great plan until the unexpected is not what you expected it to be.

The markets imploded again at the open and took us out of all our positions. This is shaping up to be a miserable month but at least there is plenty of month left.

The warnings from China about their coming "one-two punch" to control inflation was not exactly what the markets expected. What they did expect was a rate hike and some strong words about how they were confident inflation would be controlled. So the markets had priced in a potential rate hike but were blindsided by the "plan to fix prices on commodities" to keep inflation in check.

Setting the price of a commodity is a communist tactic. It never works because an immediate black market blossoms to get around the fixed price. It does cause havoc in the global economy because it artificially lowers the price of that commodity to other countries. Why should we pay $1400 for gold when China is paying $1250? Insert wheat, corn, cotton, coal, etc as your commodity of choice in that last sentence.

Add in the sudden flare up of the debt problem in Greece, Ireland, Portugal and possibly Spain and the dollar suddenly seemed like a safe haven currency even in the midst of QE2.

I have been warning readers of the various publications for the last six weeks that the "short dollar, long commodity trade" was going to end badly when the dollar suddenly finds a reason to rally. Well the dollar has rallied over the last few days to a two-month high. That creates a lot of pain for those short the greenback. Add in the pain from the suddenly plunging commodities and they are taking hits from both sides of the trade.

I considered reentering positions again tonight because the markets came to a dead stop on support at 11000 and 1175. With my money I can take that risk. With your money I can't after a painful first two weeks of November I am electing to stand aside tonight and see what tomorrow may bring. There is always plenty of time for another trade.

Jim Brown



Current Portfolio




New Recommendations


None


November Recommendation History



Option Writer has been profitable for 11 of the last 15 months

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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.