The market is inching slowly higher but I don't want to be lulled into a false sense of security.
I like a slowly rising market rather than one with triple digit gap opens but I am always worried that it is rising slowly for a reason. Reasons for a slow rise could be lack of conviction, low volume or the amount of buyers is shrinking.
I am not going to speculate on which this might be although volume is very low. Instead I am going to raise the stops again so we can exit for a profit if this year-end rally fails for any reason.
Wynn Resorts dropped $2 today on no news and stopped us out of that position at 104.25. The spike from last week never showed any follow through and sellers appeared at the open today. The option was trading at $1.25 when the stop was hit. We sold the option for $1.54 to enter the play so we exited with a minor profit.
I don't plan on sending another email until Sunday so I would like to take this opportunity to wish everyone a Merry Christmas. I also want to thank everyone for your continued support of Option Investor.
Current Position Changes
New Long Term Recommendations
None - Waiting for a "real" market dip
New Aggressive Recommendations
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.