We have several positions that will expire profitably or be called away in the August cycle.
Some of our positions are doing fantastically well including GMCR, TSLA, etc. Unfortunately the housing sector and the solar sector reached out to bite us in August. Weak earnings and high profile news events in the solar sector put a couple of our positions underwater. That sector is very volatile and we can expect another rebound in the weeks ahead.
The housing sector was hit by the rising mortgage rates and we are deeply underwater on Pulte Homes. When the trend turns around we will write some more calls. For now we have to wait because there are no premiums.
BlackBerry has been the recipient of market moving news over the last several days and we are able to write a new call on that position this week.
We should have several positions called away unless the market takes a dive over the next four days. The only position I don't want to be exercised is the FSLR short put. I am recommending we close that position before Friday.
I am still expecting a weak market in August. The rate of climb has slowed and that suggests the market is tiring.
Send Jim an email
Current Position Changes
FSLR - First Solar (Close)
First Solar was crushed when they reported earnings on August 7th. Shares dropped from $47 to $40 and have yet to recover. We have an August $45 put that is now in the money. I considered just letting the put be exercised and sell call against the stock but FSLR is right on the edge of support at $40 and a weak market or sector could push us even farther into the red. I elected to close the position and take the loss.
I put on the portfolio graphic to close on Friday but if FSLR trades below $40 I would close it immediately. By waiting until Friday I am trying to give it time for the dip buyers to appear.
Close AUG $45 Put, entry $1.71, currently $4.50, -2.79 loss.
GMCR - Green Mountain Coffee (Close short put)
We have a short August $67.50 put that has declined to 5 cents. There is nothing to be gained by leaving it open and there is always risk with an open position. Close the position.
Close GMCR AUG $67.50 put, entry $4.22, currently .05, +$4.17 gain
BZH - Beazer Homes (Close CC)
We have a short August $19 call that has declined to 2 cents. Close the August call. I am adding a longer dated call today.
Buy to close BZH Aug $19 Call, entry .87, currently .02, +.85 gain
CSIQ - Canadian Solar (Close CC)
We have an August $14 call on CSIQ that has declined to 15 cents. There is nothing to be gained by letting it expire. If we close this position we can sell a new call for additional premium.
Close CSIQ Aug $14 Call, entry $1.40, currently .15, +1.25 gain.
New Short Put Recommendations
AEGR - Aegerion Pharmaceuticals
Aegerion is a specialty pharmaceutical company that develops and produced drugs for debilitating, rare and fatal diseases. Their number one drug is JUXTAPID for hypercholesterolemia. They sell direct to patients through a specialty pharmacy.
The stock jumped on earnings at the end of July then consolidated at the $90 level. Over the last several days we have seen higher highs and higher lows and it appears to be wedging up to a breakout over $95.
Sell Sept $85 Put, currently $3.80, stop $88.95
New Covered Call Recommendations
CSIQ - Canadian Solar
We are closing the existing August $14 call today and adding a new $14 call for September. If you are already in this position I am recommending the Sept $14 call.
If this is a new position for you I would write the Sept $13 call, currently $1.25.
Sell Sept $14 Call, currently .90, no stop.
BZH - Beazer Homes
Because BZH is in a weak trend we have to stretch out a little on the timeline to November to get an decent premium. That is 90 days out but it keeps us in a profitable position.
Sell Nov $18 call, currently $1.10, no stop
BBRY - BlackBerry
BBRY has spiked over the last several days to put us in better shape after the $5 post earnings drop. There are rumors they might put themselves up for sale or allow a spinoff of assets. The $15 level is the target price according to analysts.
Sell BBRY Nov $12 Call, currently $.94, no stop.
IPI - Intrepid Potash
All the fertilizer stocks were sold hard two weeks ago when the potash consortium fell apart. Most analysts believe this is temporary and the drop in the stocks represents a buying opportunity. IPI collapsed from $19.44 to $10.61 but has rebounded over the last four days. The $14 strike would represent resistance from the initial drop. I believe IPI will recover its former price range over the next couple of months. If the premiums remain elevated we could re-write this stock several times over the next several months.
Buy write IPI Sept $14 Call, stock $13.48, call $1.10, no stop
New Aggressive Recommendations
New Long Term Recommendations
Existing Play Recommendations
Links to original play recommendation
PHM - Pulte Homes (Covered Call)
PHM - Pulte Homes (CC Update)
GMCR - Green Mountain Coffee (Covered Call)
GMCR - Green Mountain Coffee (CC Update)
SLW - Silver Wheaton (Covered Call)
SLW - Silver Wheaton (CC Update)
BZH - Beazer Homes (Covered Call)
JASO - JA Solar (Covered Call)
LGF - Lions Gate Films (Covered Call)
LGF - Lions Gate (CC Update)
BBRY - BlackBerry (Covered Call)
TSLA - Tesla Motors (Covered Call)
FSLR - First Solar (Short Put)
GMCR - Green Mountain (Short Put)
CSIQ - Canadian Solar (Covered Call)
JASO - JA Solar (Covered Call)
QIHU - Qihoo (Short Put)
TSLA - Tesla Motors (Short Put)
HLF - Herbalife (Short Put)
YY - UU Inc (Short Put)
SCTY - Solar City (Aggressive Short Put)
HLF - Herbalife (Long Term Short Put)
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.