VMWare finally tripped the trailing stop loss but it was a great ride with more than $8 in profit.
We exited the VMW play at the open on Friday when the stock dipped below the $88.95 stop loss. The option was trading at $3.47 at the time. We sold that put for $11.49 last month giving us an $8.02 profit.
If the market will cooperate and give us a few days of profit taking before the Q4 earnings start rolling out I think we can load up with a few more of those positions.
Unfortunately the potential for a January decline is very strong so we just have to be patient and wait for an opportunity.
I considered entries on more than a dozen stocks this weekend but reluctantly decided to pass on everything until we see what January is going to bring. The complete lack of volatility over the last couple weeks suggests the market is going to make a major move now that we are in a new trading year. Futures are up strongly tonight at +7 so we know there will probably be a gap open and not a good setup for new entries.
I know it is frustrating not to have anything to play but not quite as frustrating as having a bad entry that leads to a trading loss.
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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.