The worries over the Middle East protests were ignored on Monday after the U.S. economic reports posted blowout gains.
The ISM-NY and ISM-Chicago came in much stronger than expected and that convinced the buyers to return to the market. The Dow sprinted for a +96 point gain and the S&P +7. However, the Nasdaq was negative most of the day thanks to big declines in FFIV, NFLX and other high profile momentum stocks where traders were still taking profits.
Oil prices weakened but not enough to weaken oil stocks. The government approved the first deepwater drilling permit in the Gulf since the BP oil spill and that pushed the price of drillers higher. Noble Energy (NBL) was the winner of the permit and they spiked $3.50 on the news.
Despite the Nasdaq finishing only fractionally positive the other big cap indexes are moving up again. With the rest of the week's economics expected to be positive this trend should continue.
I am adding some new plays tonight in the energy sector.
Current Position Changes
RIG - Transocean Offshore $84.83 (Short Put)
Transocean rallied +1.83 on the permit for Noble because that means other permits will likely be released soon. That will allow Transocean to begin charging the full lease rate on the deepwater rigs in the Gulf. Currently they are only collecting a "standby rate" while the companies wait for new permits. I believe this is the signal for a new leg up on the drillers.
Do not enter this position unless RIG and the S&P-500 are positive.
Sell Short RIG April $80 Put, currently $1.98, stop loss $81.95
Chart of RIG
APC - Anadarko Petroleum $81.83 (Short Put)
With the approval of permits in the Gulf, Anadarko rose to $82 and appears ready to breakout to a new high after two months of consolidation in the $75-$80 range. Anadarko has a lot of deepwater assets.
Do not enter this position unless APC and the S&P-500 are positive.
Sell Short April APC $75 Put, currently $1.88, stop loss $79.50
Chart of APC
New Long Term Recommendations
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.