Hindsight may always be 20:20 but the foresight option on my crystal ball is in the shop for repair.

Last Monday I refrained from adding new positions after the market declined to pierce support intraday. That was a bad call. The market failed to continue its plunge and has now rebounded for a solid week. I wish I had a "do over" on that newsletter but that is now past tense.

With the market up for a week now and stalling at the 50-day average for the last three days it would appear we could be in for another dip. Appearances can be deceiving. We are back into the bad news is good news version of the Twilight Zone and bad news if breaking out all over.

A piece of good news was the ISM on Monday that failed to decline to the bearish projections. The slight gain was just enough to suggest the Fed will remain on hold with the QE spigots open for the rest of the year.

The big test comes on Friday with the nonfarm payrolls. The market volume will be very light the rest of the week and especially light on Friday. That means whatever the number we should have an hour long bout of volatility and then everyone goes home.

The real market direction should not appear until the following week as earnings begin to flow.

I took advantage of the market rebound to make a lot of play changes and add several new plays. This week is historically bullish so let's hope that trend holds.

Jim Brown

Send Jim an email



Current Portfolio


Current positions



Current Position Changes


TSLA - Tesla Motors (Close)

Tesla exploded higher with a +10 point gain today to close at $117. We were already way out of the month but our $85 puts are now worthless.

Close TSLA July $85 Put, entry $4.30, currently .25, +4.05 gain.

TSLA Chart


CTRX - Catamaran (Add stop)

Catamaran has taken a turn for the worse with a sharp decline to the late May support level. I am adding a stop loss at $46.50 on our July $45 puts.

CTRX July $45 Puts, add stop @ $46.50

CTRX Chart


SLW - Silver Wheaton (Close call)

Silver Wheaton fell off the proverbial cliff last week when precious metals imploded. The July $24 call is now worthless and should be closed. I am adding a new August covered call in the new covered calls section.

Buy to close SLW July $24 call, entry .99, currently .09, +.90 gain.
Previously closed: May $23 call, entry 1.13, expired, +1.13 gain.

SLW Chart


PHM - Pulte Homes (Close call)

The Pulte covered call has declined to only 8 cents and I am recommending we close it and write a new call. The stock is in our portfolio at $22.67 and it closed today at $19.11 because of the sharp rise in mortgage rates. I believe this dip is temporary.

We have written two calls against this stock for a total premium of $1.39. The second call was entered on a gap lower and that reduced the call premiums.

Buy to close PHM July $22 Call, entry .50, currently .08, +52 cent gain.
Previously closed call: June $23, entry .89, exit .07, +.89 gain.

PHM Chart


JASO - JA Solar

We have JASO shares in the portfolio with an open recommendation to sell the January $9 call when JASO hits $8.50. However, the shares are moving too slowly and the July premiums have declined to minimum levels. I am cancelling the recommendation for the July cycle. We will continue to hold JASO in the portfolio until it becomes profitable to write a new call. The shares are moving up and we are slowing returning to our entry price.

Cancel recommendation to sell July $8.00 covered call.

JASO Chart


LGF - Lions Gate Films (Close call)

LGF shares are starting to bounce now that the Hunger Games sequel is being advertised. I want to close the outstanding July $31 call and sell the September $32 call to increase our profit.

Buy to close LGF July $31 call, entry .76, currently .30, +.46 gain.

LGF Chart


BBRY - BlackBerry (Close call)

BlackBerry was crushed when it reported a loss instead of a profit for the last quarter. We are seriously underwater in this position. The outstanding July call is worthless and I want to close it. Because the stock has taken such a hit the call premiums are worthless all the way out to December. We need to hold the stock in the account until a new uptrend appears then sell additional calls. We need the call premiums to inflate before we add another call.

Buy to close BBRY July $15 call, entry .73, currently .01, +72 cent gain.

BBRY Chart


New Short Put Recommendations


GOLD - Rangold Resources

Gold the metal has takes a pounding and quite a few analysts believe we may have seen the bottom at $1179 last week. Gold has rebounded to $1260 in two days. The shorts are starting to cover. Rangold appears to have put in a bottom at $60.60 and has rebounded to $64. The volatility in gold and GOLD has inflated the put premiums to a level I believe is acceptable for this stock.

Sell to open GOLD August $60 Put, currently $2.40, no stop.

GOLD Chart


New Covered Call Recommendations



SLW - Silver Wheaton

Silver Wheaton has been in the portfolio as a covered call position since late March at $22.63. We have written two calls against it for $2.22 in premiums. I am adding a new August call today.

Sell to open SLW August $22 call, currently .79, no stop

SLW Chart


PHM - Pulte Homes

Pulte declined on the increase in mortgage rates. I believe this is temporary. We will keep writing calls until they expire in the money.

We have written two calls against this stock for a total premium of $1.39. The second call was entered on a gap lower and that reduced the call premiums.

I am selling the August $21 for slightly less premium than the $20 because I believe the $20 would be called and leave us short about 50 cents in the overall position.

Sell to open PHM August $21 call, currently .58

PHM Chart


BZH - Beazer Homes

We had a covered call on Beazer in the June expiration cycle that expired. I am adding a new August call now that the premiums have inflated thanks to the bounce over the last several days.

Sell to open BZH August $19 call, currently .85, no stop

BZH Chart


LGF - Lions Gate Films

LGF shares are starting to bounce now that the Hunger Games sequel is being advertised. I want to sell the September $32 call.

Sell to open LGF Sept $32 Call, currently .90, no stop.

LGF Chart


GMCR - Green Mountain Coffee (Covered Call)

We have GMCR in the portfolio from the covered call we sold in June. That call expired slightly out of the money. The rebound over the last several days has inflated the premiums and we are going to repeat the process.

Sell to open GMCR August $77.50 covered call, currently $6.50, no stop.

GMCR Chart


New Aggressive Recommendations


None


New Long Term Recommendations


None


Existing Play Recommendations


Links to original play recommendation

HLF - Herbalife (Covered Call)

PHM - Pulte Homes (Covered Call)

GMCR - Green Mountain Coffee (Covered Call)

SLW - Silver Wheaton (Covered Call)

BSFT - Broadsoft (Covered Call)

JASO - JA Solar (Covered Call)

DDD - 3D Systems (Short Put)

LGF - Lions Gate Films (Covered Call)

BBRY - BlackBerry (Covered Call)

TSLA - Tesla Motors (Short Put)

CTRX - Catamaran Corp (Short Put)

Z - Zillow (Short Put)

CRR - Carbo Ceramics (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.