Half of our plays were triggered at the open and it appear it was the right half.

The Oil Exploration SPDR traded positive at the open thanks to three different acquisitions in the energy sector that made investors reluctant to sell their favorite stocks despite the bad market. The XOP only declined 70-cents for the day and I consider that a win.

The Russell 2000 ETF (IWM) gapped down at the open and was never triggered. I am cancelling that position tonight and will look again on Tuesday night for another entry.

IBM reported decent earnings but the stock was priced to perfection and the few little hiccups in their details caused IBM to decline -$7 after the close. For instance hardware sales rose only 4% in Q3 compared to 17% in Q2. Revenue was ever so slightly under analyst estimates. Even though they beat on earnings per share and raised guidance the shares sold off.

If that holds through the open on Tuesday it would equate to -56 Dow points.

The SLV play was closed when the option opened at 3-cents which gave us a minor profit of 32-cents on what was essentially a busted play. The SLV gapped open more than $3 on the morning the play was initiated and that caused the put premiums to deflate significantly. I wish all our busted plays could be closed for a 32-cent profit.

On the plus side the other positions did not really follow the market lower. Hewlett Packard was the biggest decliner at -$1.25 but that is a January position so plenty of time for the news to re-inflate it.

If the outlook for Wednesday's open is positive I will send an update email Tuesday night. Otherwise we will wait. The -247 point Dow decline today closed right on support at 11,400 but that drop by IBM could be a challenge that knocks the Dow below support and cause additional profit taking. We will wait to launch new plays until all the factors are lined up correctly again.

Jim Brown

Send Jim an email



Current Portfolio


Current positions


Current Position Changes


SLV - Silver ETF (Closed)

The short Oct $26 put was trading at 3-cents at the open and the SLV trade is now closed.

Closed SLV Oct $26 Put @ 3-cents, gain +32 cents.


Cancel IWM Short Put

The IWM opened negative on Monday and the trade was never triggered. Cancel the recommendation.


New Short Put Recommendations


None


New Covered Call Recommendations


None


New Long Term Recommendations


None


New Aggressive Recommendations


None


Existing Play Recommendations


Links to original play recommendation

BAC - Bank of America (Long Term)

BAC - Bank of America (Update 8/31)

BZH - Beazer Homes (Long Term)

MDR - McDermott International (Long Term)

BK - Bank of New York Mellon (Long Term)

NVDA - Nvidia (Long Term)

SD - Sandridge Energy (CC + Long Term Combo)

YHOO - Yahoo (Long Term Combo)

HPQ - Hewlett Packard (Aggressive Short Put)

PHM - Pulte Homes (LT Leveraged Combo)

SLV - Silver ETF (Short Put)

XOP - Oil Exploration SPDR (Short Put)


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.