The volatility continues with a dip below support on the Dow and right to support on the S&P before a late day buy program started squeezing the shorts.
Overall it was a good day. Even with the dip below support on the Dow we only lost two positions and neither one cost us any money. Seven of the 11 stocks in the portfolio finished with a gain. For a down day in the market we can't complain. We have some of the strongest relative strength stocks available today.
We did lose Mosaic with dip through our stop at $67.75 but the option was only bid at 95-cents at the time compared to our 96-cent entry. The high for the day was only $1.01 so the premium bleed last week helped keep us out of trouble.
We also lost Teck Resources when it fell through the stop at $47.50 and our option was bid at 84-cents compared to our entry at 86 cents. Again, the premium bleed from last week kept us safe. TCK recovered to end the day with a gain but we were left on the sidelines waving goodbye.
The OIH got some help from a strong gain in crude prices and just in time. The morning dip took it to 126.30 with our stop at 126.25. Almost immediately it began rebounding to close at the highs of the day at 130.80 and a +2.67 gain. No complaints there.
Amazon continues to be amazing with another $2.29 gain to a new high.
I am glad I did not add anything Sunday night given the morning's volatility. No changes to the portfolio tonight.
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.