The Dow declined eight consecutive days and a feat only seen four times since 1978. Had Wednesday been negative it would have been the only time since 1978 with nine consecutive declines.
Obviously the market is very oversold. While I believe the rebound today was lackluster it did erase a -160 point drop on the Dow and prevent the major indexes from closing under critical support.
The ADP payroll report today was solid with a forecast of 114,000 new jobs for July. If by some remote chance Friday's Nonfarm Payroll report is even half as strong it would be a very positive surprise for the markets.
I am going to launch three low volatility plays for Thursday's open in hopes we can start putting some profits on the board if the market decides to move higher. I am going to put tight stops once we are in the position just in case disaster strikes.
Current Position Changes
New Short Put Recommendations
LVS - Las Vegas Sands $46.79 (Short Put)
The Sands reported very strong earnings and guided higher. They declared a dividend on Tuesday and on Wednesday they said they were buying back all their series A preferred shares and would save $76 million a year in dividends. The Sands is rolling in cash thanks to the Chinese casinos. If the market remains positive they should be a strong performer.
Do not enter this position unless the S&P and LVS are both positive by 10:AM
Sell Short Sept $44 Put, currently $1.53, stop $44.50
Chart of LVS
SNDK - SanDisk $42.54 (Short Put)
SanDisk reported great earnings and then sold off with the market but found support at $41 for all except Tuesday's mini crash. Wednesday saw a +4% rebound and several analysts were talking positive about their future. I believe $41 should hold as long as the market remains positive.
Do not enter this position unless the S&P and SNDK are both positive by 10:AM
Sell Short Sept $40 Put, currently $1.46, stop $40.50
Chart of SNDK
New Covered Call Recommendations
VPRT - Vistaprint $29.98 (Covered Call)
Vistaprint reported earnings on Friday and beat the street with 43 cents over 32 cents on a +27% increase in revenue. However, guidance, although positive was less than analysts were expecting and the stock was crushed. The extremely overdone drop is already seeing bargain hunters come back into the stock. We know where strong support is at $27 so the risk should be minimal.
You can stretch out to the $32.50 call for 75-cents and +2.50 of stock appreciation if you want a little more risk/return.
Buy write VPRT Sept $30 call, currently $1.70, stop $27.50
Chart of Vistaprint
New Long Term Recommendations
New Aggressive Recommendations
None until a positive market trend returns
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)