Although earnings are over for 65% of companies there are still some late reporters.

Unfortunately for those companies already reported the option premiums have shrink to almost nothing. Only the companies still to report have decent premiums. This is the problem we face every earnings cycle.

I went through several hundred charts and corresponding option chains over the weekend and there was almost nothing worth playing. With the market approaching its recent highs the put premiums were almost invisible.

If you want to live dangerously here is a list of decent charts and premiums but they all have earnings over the next two weeks.

CRM Mar $60 put $2.00 earnings 2/27
DDD Mar $65 put $2.50 earnings 2/28
FSLR Mar $48 put $2.36 earnings 2/25
ISIS Mar $48 put $3.10 earnings 2/27
ISIS Mar $46 put $2.60 earnings 2/27
NUS Mar $70 put $4.60 earnings 2/20
NUS Mar $65 put $2.65 earnings 2/20
PANW Mar $65 put $2.55 earnings 2/24

I prefer to be a bit more cautious. I did manage to find a couple puts and a call that I thought were fit for publication. We have a lot of positions expiring next week and a lot more companies will have reported by next Friday so hopefully the pickings will be a little better.

Over the weekend we found out that George Soros doubled down on his bet that the market is going to crash. His bearish bet is now 11% of his portfolio. He is betting $1.3 billion on a correction in the S&P. Let's hope he is wrong.

I am closing the TSLA put this week with a gain of $26 in premium per share. That is the biggest win we have had in the last year and I will be adding more plays like that in the future.

Jim Brown

Send Jim an email



Current Portfolio


Current positions

Covered Calls

Long Term Positions


Current Position Changes


TSLA - Tesla Motors (Close)

We have a short March $150 put on Tesla that we wrote in December. The stock is currently trading at $198 and earnings are this week. We know how volatile these momentum stocks can be after earnings. I am recommending we close the position on Tuesday and take our chips off the table.

We have a whopping big gain and there is no reason to give any of it back.

Buy to close Mar $150 Put, entry $28.30, currently $1.95, +26.35 gain.

Chart


BBRY - BlackBerry (Close, Write New)

We have a Feb $10 covered call and BBRY shares dropped $1 last week from $10 to $9. I want to close the Feb call and write a new April $10 call. The March $10 strike is only 32 cents.

Buy to close Feb $10 call, currently .05, +.68 gain.
Sell to open April $10 call, currently .61, no stop.

Chart


PRAN - Prana Biotech (Close, Write New)

We have a Feb $10 covered call that is OTM. I want to close that call and sell a new March call before they become the front month and the premium evaporated. PRAN has developed a downward trend but support is $6. As long as the premiums remain this inflated I am content with writing new calls until the stock turns around.

Buy to close Feb $10 call, currently 20 cents, +1.63 gain
Sell to open Mar $10 call, currently $1.45, no stop.

Chart


SINA - Sina Corp (Close)

SINA did not rise last week as I had hoped. I was expecting another $2-$3 before we had to exit before earnings. It appears I was too optimistic. Close on Tuesday. If you want to be aggressive you could leave it open over earnings but I strongly recommend against it. We could easily see a 10% move in either direction.

Buy to close Mar $62.50 put, entry $2.75, currently $2.22, +.53 gain.

Chart


AEGR - Agerion Pharma (Close)

Agerion was on a rocket ride higher and I had expected it to continue into earnings. Unfortunately it rolled over on Wednesday and closed down for the week. Earnings are on the 26th so we need to exit before then to avoid any post earnings volatility. However, with the change in trend I don't want to wait. Exit on Tuesday.

Buy to close March $57.50 put, entry $2.90, currently $2.95, -.05 loss.

Chart


New Short Put Recommendations


YY - YY Inc (Short Put)

YY in China is similar to Facebook. They operate an online social platform that offers real time access to user crated social activity. They also operate an online gaming platform. Earnings are March 4th so this would be a two week play.

The stock is moving up and preparing to retest $70 after a couple dips in January. What attracted me to YY was the high premiums. The stock is not as clean as I would like but we can sell about $8 out of the money for $3.50 in premium.

Sell short Mar $60 Put, currently $3.50, stop loss $62.75

Chart


XONE - Exone (Short Put)

XONE crashed when 3D Systems (DDD) warned on guidance a couple weeks ago but they are slowly crawling out of their dip. The bottom in the crash was $40 and that is now support. This means we can sell that support level with greater confidence it will not be broken. Earnings are March 19th, Wednesday of expiration week so no risk there. We will be out before earnings.

Sell short XONE March $40 Put, currently $1.65, stop $41.95

Chart


New Covered Call Recommendations


QIWI - QIWI Plc

QIWI operates a payment processing service primarily in the Russian Federation, USA and the UAE. They operate 120,000 kiosks and 49,000 terminals. They offer a VISA Wallet and an online payment service similar to Paypal.

Shares declined recently after Russia proposed a limit to online money transfers without identification. There was some worry that it would cut into QIWI's business but that worry is fading. They are growing fast enough in other areas to offset any weakness from Russia.

QIWI is working on resistance at $40 so the ATM call is pretty large at $3.30. There are no earnings dates posted.

Buy-write March $40 call, currently $39.93-$3.30, stop loss $37.45

Chart


New Aggressive Recommendations


None


New Long Term Recommendations


None


Existing Play Recommendations


Links to original play recommendation

CZR - Caesar Ent (Covered Call #1)

CZR - Caesar Ent (Covered Call #2)

CZR - Caesar Ent (Covered Call #3)

TSLA - Tesla Motors (Long Term Short Put)

INCY - Incyte (Covered Call)

VNET - 21Vianet (Covered Call)

TAN - Solar ETF (Long Term Short Put)

CLVS - Clovis Oncology (Aggressive Covered Call)

ARWR - Arrowhead Research (Covered Call)

EXAS - Exact Science (Covered Call)

CLVS - Clovis Oncology (Aggressive Covered Call)

HIMX - Himax Tech (Covered Call #2)

BBRY - BlackBerry (Covered Call)

GILD - Gilead Sciences (Short Put, Cov Call)

PRAN - Prana Biotech (Covered Call)

GALT - Galectin Therapeutics (Covered Call)

QIHU - Qihoo 360 Technology (Covered Call)

VRX - Valeant Pharma (Short Put)

NLNK - Newlink Genetics (Short Put)

SINA - Sina Corp (Short Put)

VJET - Voxeljet (Short Put)

AEGR - Agerion Pharma (Short Put)

ARWR - Arrowhead Research (Covered Call)

YUM - YUM Brands (Aggressive Short Put)

ILMN - Illumina (Aggressive 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.