The Dow dropped -12 points but the Russell fell -2.5%. That is not a good sign.

The Dow did not decline because of IBM's $5 gain. That supported the Dow while the other indexes were crashing. The dollar crashed through support and fell to a two month low. Tech stocks declined sharply even though Apple held its gains.

This could be the start of the correction I have been looking for and we could be setting up for a nice buy the dip play once we see how this plays out.

Today was not a good day for our positions. VMWare dropped -$4 and stopped out a $94.25 for a 35-cent loss on the option.

First Solar, after a +7 run on Tuesday gave back -4.27 today. I had moved up the stop to take us out with a profit and we were stopped at 145.25 for an 81-cent gain.

Be ready as we head towards the weekend. If we were lucky enough to see the decline continue we could be buying the dip soon. Since I am normally early on jumping into market events I am going to practice a little more caution on this next move. We don't know if this dip will be 2% or 10% so we will let the market be our guide.

Jim Brown



Current Portfolio




Current Position Changes


VMW - VMWare (Stopped out)

VMW was stopped out when it traded at $94.25 intraday. The option was trading at $2.60 at the time. We entered the trade on Tuesday at $2.25 giving us a 35-cent loss.


FSLR - First Solar (Stopped out)

First Solar stopped us out at $145.25 with the option trading at $2.19. We entered the position on Tuesday for $3.00 giving us an 81-cent gain.


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)