After a big opening spike on Monday each of our positions gave back most of their gains.

Millicom (MICC) opened with a +2.70 gain but ended the day with only $1.12. FCX gained +2.35 at the open but gave it all back to lose -50 cents for the day. Flowserve gained +2.78 but gave back all but a dollar.

I am telling you this because I believe the market is telegraphing a period of profit taking ahead. Obviously the opening gains were short covering but quite often those gains will last the entire day as shorts hoping for a gap and crap end up chasing prices higher at the end of the day. That did not happen today. Sellers showed up in volume on the spike. Volume was more than double that on Thursday and Friday but still only in the 7.5 billion range. A lot of traders were still on their holiday break but that will end tomorrow.

I raised a couple stops again in order to take us out if any real weakness begins.

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.

Jim Brown

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Current Portfolio




Current Position Changes


None


New Recommendations


None


New Long Term Recommendations


None - Waiting for a "real" market dip


New Aggressive Recommendations


None


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)