We have been living a charmed life of shallow dips followed by new highs for more than two months. Eventually this dream will end.

You would think with the Greece drama coming to an end the market would pick up speed and begin to tack on points at a faster rate than 2-3 points a day on the S&P. In a perfect world it would but we are far from perfect.

The resolution to Greece was to the most part already factored into the market. Sure there was some uneasiness as the various factions fought for their positions but nobody really expected the EU to turn them down. Greece will still probably default on more than just the private sector investors but it may not be until later this year or early 2013. For all practical purposes Greece is on the back burner and will disappear from the daily headlines after the March 20th payment date.

That does not mean all is well in Europe. Crude oil priced in euros hit an all time high on Friday at 93.60. That is higher than the 2008 high and it means Europe is on the verge of a very tough fuel price recession. They are already in an austerity induced recession but with fuel prices at record highs soon the entire European economy is going to sink. Forced austerity is bad enough but adding record high fuel prices is the one-two knockout punch.

The market may not have actually figured this out yet so we may not see the impact in our markets for a few days but you can bet the media will be on this like stink on a skunk very soon. All day Friday they hit on the rising gas prices in the U.S. and the potential for consumers to cut back on spending. These reactions don't happen overnight but coming this close after the 2008 oil price spike I would expect the realization to dawn on investors sooner rather than later.

Without Greece in the headlines the focus will turn back to earnings and economics both in the U.S. and overseas. There were several news shows this weekend talking about the potential decline in China. They don't believe the Chinese government is going to react fast enough to prevent a hard landing. Also, economic numbers from Germany and France last week were weaker than expected. These issues will get a lot more play now that Greece is not hogging the headlines.

Crude prices rallied to $109.83 at the close on Friday. They opened slightly lower Sunday night at $109.50 but I do expect a larger dip. That spike over the last three weeks is too vertical. The reasons have not changed and I do expect higher highs. However, a dip would only be reasonable at this point.

WTI Crude Oil Chart

Futures opened down on Sunday and I would rather err on the side of caution than launch new plays at a potential market failure point. We have a good portfolio at present and no rush to add plays just to be adding plays. I will send another newsletter Monday night after I see what Monday produces in the way of market action and news flow.

Jim Brown

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Current Portfolio


Current positions

Current positions


Current Position Changes


JJC - Copper ETF

We were stopped out on the short put on the copper ETF when it hit our stop at $48.45.

Closed: Short Mar $45 Put @ 0.80, exit 0.55, +0.25 gain


New Short Put Recommendations


None


New Covered Call Recommendations


None


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)

SD - SandRidge Energy (Long Term CC)

YHOO - Yahoo (Long Term Combo)

PHM - Pulte Homes (LT Leveraged Combo)

JEF - Jefferies (LT Leveraged Combo)

GLD - Gold ETF (Short Put)

WFC - Wells Fargo (Combination)

CRR - Carbo Ceramics (Short Put)

JJC - Copper ETF (Short Put)

WNR - Western Refining (Covered Call)

EXXI - Energy XXI (LT Covered Call)

RIG - Transocean Offshore (Short Put Spread)

USO - US Oil Fund (Covered Call)

UGA - US Gasoline ETF (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.