The markets rebounded +6% in seven days and appear to be trying to retest the highs on the Dow and Russell. If the end of quarter window dressing follows the historical pattern it could happen before Friday.

Unfortunately the +6% rebound in the markets has the potential for profit taking before it continues higher. If it happens I am not expecting anything major unless there is some new headline with really bad news.

After getting burned earlier in the month I am not going to back up the truck and load up on positions today. I would like to see at least some intraday profit taking first but I did add a couple.

Easy does it until we have an actual trend again instead of a 6% spike. If we do get a brief pullback I will add some more then. While I want to be long into month end I would also like to have our stop losses in a profitable position before April 5th. If we are going to see weakness ahead of the April FOMC meeting it could start early in the quarter when there is no pressure on fund managers to be fully invested.

Jim Brown



Current Portfolio


Current positions


Current Position Changes


None


New Recommendations


CF - CF Industries $132.20 (Short Put)

CF is the largest nitrogen fertilizer distributor in the U.S. and also handles phosphate fertilizers. The company beat the street with Q4 earnings and sales rose +144%. This should be a good long term hold for a stock investor but the fertilizer companies have so much volatility for various reasons they are good for a heart attack about once a month.

Despite the decent earnings the stock sold off in March and found a support base in the $125 range. Nitrogen is the fertilizer required for corn, which is the hottest of the grain commodities. The desire to grow more corn while prices are high should keep sales booming at CF.

The risk here is the potential for flooding in the Midwest after the NOAA issued a warning forecast on Friday suggesting spring rains could be heavy.

I am also adding CF as a long term play.

CF spiked +6 on Friday and I expect some of that to fade on Monday. Hopefully it will be at the open and we can get a better entry point somewhere around $130.

Don't enter this position unless the S&P is positive on Monday. CF can be negative.

SELL SHORT CF APR $125 Put, currently $2.56, stop $2 below CF at entry.
(If CF opens at $129 then the stop would be $127) Chart of CF


New Long Term Recommendations


CF - CF Industries $132.20 (Short Put)

CF is the largest nitrogen fertilizer distributor in the U.S. and also handles phosphate fertilizers. The company beat the street with Q4 earnings and sales rose +144%. This should be a good long term hold for a stock investor but the fertilizer companies have so much volatility for various reasons they are good for a heart attack about once a month.

Despite the decent earnings the stock sold off in March and found a support base in the $125 range. Nitrogen is the fertilizer required for corn, which is the hottest of the grain commodities. The desire to grow more corn while prices are high should keep sales booming at CF.

The risk here is the potential for flooding in the Midwest after the NOAA issued a warning forecast on Friday suggesting spring rains could be heavy.

CF spiked +6 on Friday and I expect some of that to fade on Monday. Hopefully it will be at the open and we can get a better entry point somewhere around $130.

Don't enter this position unless the S&P is positive on Monday. CF can be negative.

SELL SHORT CF MAY $115 Put, currently $2.88, stop $123.75.

Chart of CF


New Aggressive Recommendations


FLR - Fluor Corp $74.00 (Short Put)

Fluor is a Fortune 200 company (actually 111th) and is the largest engineering and construction company in the world. They design and build multi-billion energy plants, oil production platforms, refineries, pipelines, etc. If the global economy is really recovering then Fluor should continue to do well.

Earnings were rocky in Q4 because of a $180 million charge on an offshore wind farm development. However, bookings rose to a record and they affirmed their full year guidance for 2011. They declined on the earnings and built a base at $68 and now appear to be on the move again.

This is an aggressive play. I am going to recommend the May $75 put with FLR at $74. We may see some pullback from last week's gains but I think it will stop at $70, worst case. The May $75 put has a premium of $4.20 so even if we were put the stock our cost would be $70.80 and right at support.

Don't enter this position unless the S&P is positive. FLR can be negative. I would love to see it gap down about $2 on Monday morning.

Sell Short FLR May $75 Put, currently $4.20, stop $69.50 (wider than normal)

Chart of Fluor


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)