We rarely hold over an earnings event and NetFlix has earnings on Wednesday.
With the recent divergence in opinions over NetFlix and they wide range of estimates over earnings it could be a disaster in the making.
We have a short February $75 put and NFLX was $97.81 at the close. Normally being more than $20 OTM would be enough to protect us but you never know.
The put has declined to only 52 cents so closing it early will not cost us any money. We are up +$2.50 on the trade so better safe than sorry.
Buy to close NFLX Feb $75 Put, entry $2.98, currently .52, +2.46 gain.
Expedia (EXPE) was stopped out today but I will cover that in the next newsletter.
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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.