It appears we exited those positions on Friday just in time with Sears Holding losing nearly $4.

It is too soon to tell what next week will look like in the market but the futures are down sharply tonight. There is a lot of darkness left before morning so anything is possible.

I am very pleased with the exits on DLTR, SHLD and HPQ. I may have jumped the gun on NVDA but any exit for a profit can't be all bad.

The week ahead could be rocky. There are numerous high profile economic reports plus a two day Fed meeting followed by a Bernanke press conference. Plus a new fiscal year for mutual funds begins on Tuesday. Fund managers could decide to take profits from the October rally and shift into other investments.

Really we just don't know what to expect. This is a good week to be out of short term plays and looking for a new entry point. We are eventually going to get a couple days of profit taking from the October rally. That will be the entry point for new plays. Unfortunately we also have the Congressional Super Committee compromise due for Nov 23rd so that will also be a challenge for the market.

For obvious reasons I am not going to recommend any plays today. If we get the dip I will jump in with a couple of new plays when the dip occurs.

We still have a full portfolio of longer term plays so we are not out of the market. We are just maintaining a conservative posture.

Jim Brown

Send Jim an email



Current Portfolio


Current positions


Current Position Changes


DLTR - Dollar Tree (Closed Short Put)

Closed: Short NOV $72.50 put, premium $1.78, exit 0.65, gain +1.13


SHLD - Sears Holding (Closed Short Put)

Closed: Short NOV $52.50 put, premium $2.04, exit 0.25, gain +1.79


HPQ - Hewlett Packard (Closed Short Put)

Closed: Short JAN $25.00 put, premium $4.25, exit $1.15, gain +3.10


NVDA - Nvidia (Closed Short Put/Long Call)

Closed: Short JAN 2013 $15.00 put, premium $3.88, exit $3.40, gain +0.48
Closed: Long JAN 2013 $12.50 Call @ $4.65, exit $4.84, gain +0.55


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)

XOP - Oil Exploration SPDR (Short Put)

UWM - UWM ETF (Covered Call)

JJC - Copper ETF (Covered Call)


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.