The market dip on Tuesday coupled with the decline in commodities was a wake up call for the bulls.

The morning dip knocked us out of FCX and FLS but both were stopped for a decent profit.

Freeport was crushed for a $7 loss intraday but rebounded at the close. That rebound was too late for us and we exited at the stop at $118.50 with the option at 74-cents. That was a $1.98 gain on the play.

Flowserve was knocked for a $5 loss intraday and stopped us out at $118.50 for a gain of $2.41.

Twice already this week the market has spiked to resistance and then sold off. I believe the January decline is beginning like a volcano rumbles for a couple weeks before it explodes. The market is rumbling and becoming unsteady. We could see a continued gain for a day or two or even a week or two but I believe the signals are clear.

I am recommending we exit the MICC play at the open on Friday. With the stock price $11 over the strike price the bid/ask has not moved in several days. The longer we wait for another ten cent drop in order to exit the more exposed we are to a disaster. Let's take our 75-cents and run.

That will clean out the portfolio and make worrying about a potential decline a pleasant experience instead of one full of anguish over open positions. When you are in cash you want a decline as a buying opportunity. It changes your entire mindset when you plan for it in advance.

Jim Brown

Did you know you can get the Option Writer, LEAP Trader, Premier Investor and Couch Potato Trader newsletters for free with a year end subscription to Option Investor? Click here for details



Current Portfolio




Current Position Changes


CLOSE MICC at the open on Wednesday

I am recommending we exit the MICC play at the open on Friday. With the stock price $11 over the strike price the bid/ask has not moved in several days. The longer we wait for another ten cent drop in order to exit the more exposed we are to a disaster. Let's take our 75-cents and run.


New Recommendations


None


New Long Term Recommendations


None - Waiting for a "real" market dip


New Aggressive Recommendations


None


December Recommendation History



Option Writer has been profitable for 13 of the last 17 months

Click here for November Results
Click here for October Results
Click here for September Results
Click here for August Results
Click here for July Results
Click here for June Results
Click here for May Results
Click here for April Results
Click here for March Results
Click here for February Results
Click here for January Results
Click here for December Results
Click here for November Results
Click here for October Results
Click here for September Results
Click here for August Results


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.