The market lost its footing today when John Kerry spoke and it appeared the U.S. was going to hit Syria.
They say you should buy stocks when there is blood in the streets. I don't think they were talking about Syria when traders of old coined that expression.
The events in Syria are just one more problem piling up on the September calendar. Add in the debt ceiling debate, FOMC meeting and German elections and we should have a rocky month. Since September is normally rocky anyway this could be a volatile few weeks.
I am still expecting the markets to decline with the Dow potentially falling to 14,400. I think it will be temporary and October will begin a yearend rally. That of course assumes a lot and the economics have not been particularly favorable for accelerating growth so anything is always possible.
I limited new positions to a minimum using what appears to be bullet proof stocks.
Cash is a position. There is no need to force plays just to have something to do. We have had a good run the last several months so be patient and limit your positions.
Send Jim an email
Long Term Positions
Current Position Changes
HLF - Herbalife (Closed)
Herbalife collapsed last week after news broke that a star salesman committed suicide. John Peterson earned more than $3 million in 2012 and was a member of the Founders Circle. He rose to fame using an online lead generation tactic that Herbalife banned this year after Bill Ackman attacked the tactic. Apparently Peterson saw no future in Herbalife without that tactic.
The stock dropped from $65 to $60.50 intraday. We don't know what the lasting implications will be for HLF shares so I recommended we take this additional risk off the table.
Fortunately HLF shares spiked at the open on Tuesday and we exited for only a minor loss.
Closed HLF short Nov $57.50 put, entry $4.25, exit $4.41, -.16 loss.
QIHU - Qihoo (Close)
Qihoo is in rocket mode and gained another $5.67 today. The short $55 put we have has declined to 10 cents and there is no reason to leave the position open.
Close the put.
QIHU Sept $55 Put, entry $2.65, currently .10, +2.55 gain.
TSLA - Tesla Motors (Close Sept Put)
Tesla is the stock that thinks it can. Hardly a day goes by that it does not gain ground. We have a short sept $120 put that has declined to 80 cents. Let's close it and launch another one.
TSLA Sept $120 Put, entry $7.00, currently .80, +6.20 gain.
New Short Put Recommendations
TSLA - Tesla Motors
As long as TSLA continues moving higher on a daily basis we can continue using it as a "vehicle" for new plays. Option premiums are off the chart and we should take advantage of it as often as possible.
Aggressive traders may want to sell the Oct $150 put for $9.35.
Sell TSLA Oct $140 Put, currently $6.10, no stop.
New Covered Call Recommendations
New Aggressive Recommendations
QIHU - Qihoo (Short Put)
QiHoo reported earnings on Monday. They were a blowout. Shares rocketed +5.67. There will probably be some profit taking but not much. The company just launched a new search engine last month and it is rapidly gaining market share in China.
Revenues grew 108% year over year.
Net income from its popular Qihoo 360 operation grew 372%.
The reach of its mobile security product grew by 182%.
Average clicks per day on its Personalized Start-up Page including subpages reached 590 million compared to 368 million one year ago.
Its PC based products achieved penetration of 96%.
Net margin increased to 21.8% compared to 9.6% in the same quarter in 2012.
I am recommending an aggressive position in the Oct $75 puts. We may see QIHU decline to that level in the coming days but with growth like I listed above there will be buyers.
Sell QIHU Oct $75 Put, currently $4.80, no stop
New Long Term Recommendations
Existing Play Recommendations
Links to original play recommendation
PHM - Pulte Homes (Covered Call)
PHM - Pulte Homes (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)
CSIQ - Canadian Solar (Covered Call)
JASO - JA Solar (Covered Call)
QIHU - Qihoo (Short Put)
TSLA - Tesla Motors (Short Put)
SCTY - Solar City (Aggressive Short Put)
HLF - Herbalife (Long Term Short Put)
GMCR - Green Mountain Coffee (Covered Call)
TSLA - Tesla Motors (Covered Call)
JCP - JC Penny (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.