A headline a day keeps us on our toes. Today it was China.

The Ukraine headlines may not have faded but after two weeks of news flow traders are starting to ignore them.

Today's headline was an 18% drop in exports from China. Is this the end of the "Made in China" era? Clearly China is fighting a declining economy but that may also mean the global economy is consuming less goods. You can bet if there were orders China would be happy to export it.

The worry over China was a cloud over the markets but they rebounded sharply from the morning drop. The Nasdaq 100 ($NDX) and the S&P-100 ($OEX) finished positive for the day and the S&P-500 was only fractionally negative.

It looks like traders are still buying the dips and the unofficial target is S&P 1,900, which is 23 points away. I would expect the market to drift higher until the next headline hits.

The dip knocked us out of a couple plays but there was no damage done because the premiums had already evaporated.

Jim Brown

Send Jim an email



Current Portfolio


Current positions

Covered Calls

Long Term Positions


Current Position Changes


Stop loss updates

Check the portfolio graphics for stop loss changes in bright yellow.


GILD - Gilead Sciences (Stopped)

We had a short $80 put on Gilead that was stopped when the stock dropped back to our stop loss at $80.45. Because it was a March put the premiums had already declined somewhat and we escaped with a profit.

The 50-day average on GILD has been a good entry point over the last six months so I am going to launch a new position today.

Closed Mar $80 put, entry $4.15, exit $2.60, +1.55 gain



QIWI - QIWI Plc (Stopped)

The QIWI covered call was finally stopped out. This is the Russian equivalent of PayPal and the crash in the Russian market over the Crimean invasion finally knocked us out.

Closed QIWI shares, entry 40.74, exit $37.85, -$2.89
Closed Mar $40 call, entry $4.10, exit $1.50, +2.60 gain
Net loss -.29 cents.



VJET - Voxeljet (Stopped)

VJET crashed -6% today after Barron's published a negative article on the 3D printing sector. This stopped us out at $33.45.

Closed Mar $30 Put, entry $1.70, exit .82, +.88 gain.



FEYE - FireEye (Close)

FEYE dropped sharply on Friday and gave back a little more today. I am recommending we close this position since the trend seems to have changed.

Buy to close Mar $70 put, entry $2.25, currently .65, +1.60 gain.



New Short Put Recommendations


GILD - Gilead Sciences

Gilead has a nice steady chart with multiple dips to the 50-day average for support. That is where it closed today and should represent a decent entry point. I am recommending the May $75 put even though earnings are April 1st. I am hoping for a rebound to the highs with the prior pattern repeating so we can exit before April 1st.

Earnings April 1st.

Sell short May $75 put, currently $2.85, stop loss $77.50



ARUN - Aruba Networks

Aruba is starting to break out of some serious congestion and setting a new nine month high. Earnings were good and guidance was decent. Analyst estimates for the current quarter have more than doubled from 9 cents to 20 cents. I am going to recommend the April $21 put but aggressive traders may want to move up to the $22 or even $23 strike. I wanted to sell a covered call on Aruba but the premiums were too small.

Earnings April 22nd, which is after expiration.

Sell short ARUN Apr $21 Put, currently $.80, no stop.



AVG - AVG Technologies

AVG is recovering from a nasty fall in November from $26 to $16. The consolidation at that level lastes three months with the low at $15 in early February. Shares spiked on Feb 20th after they reported strong earnings and a 25% growth in subscription revenue and raised their guidance. Shares have been moving up strongly since that event.

I believe they will retest the prior highs at $26 before earnings in May. I am recommending the April $22.50 put but it has zero open interest. Readers may want to step up to the April $25 put which has OI. I personally don't mind a zero OI strike as long as the premium makes it worthwhile and deters the market maker from executing the put the same day it is written. After the first day it does not matter.

If the market maker wanted to exercise the put after you wrote it with a premium of $2 he would be selling you stock at $22.50 that he paid $20.88 at today's closing prices. In other words he would be losing money after taking into account the $2 in premium. It is not a lot in this case but because since there is OI in other strikes I would not worry about an early exercise. I have found in the case of an early exercise that if you immediately sell the stock and short the put again at the open they normally get the hint and leave the options alone. The most I have ever had to do that was twice on one stock. They don't like to lose money and continually exercising puts where they are losing money is not a wise move for a market maker.

Earnings May 21st.

Sell short Apr $22.50 Put, currently $2.00, no stop.
Aggressive traders may want to sell the $25 put for $4.10



New Covered Call Recommendations


None


New Aggressive Recommendations


AGN - Allergan Inc

Allergan had a decent period of consolidation in late January and has finally pulled out of that bout of profit taking and has been steadily moving higher. It is about to break over current resistance at $130. The stock has shown no interest in moving lower even though the biotech sector has been tanking. Allergan appears to be immune to that profit taking. This means when the biotechs rebound we should see AGN move strongly to the upside.

I am recommending an ITM April $135 put. Earnings are not until after expiration.

Earnings April 30th.

Sell short AGN Apr $135 Put, currently $8.40, stop $124.85



PII - Polaris Industries

Polaris was knocked for a huge loss with the Q4 earnings but the stock has rebounded strongly. It is currently pressuring resistance at $140 and should return to the old highs at $147 if the market cooperates. I am recommending the April $140 put and I hope PII will be in the $145+ range before expiration.

Earnings April 29th.

Sell short APR $140 Put, currently $4.60, stop loss $135.50



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)

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)

BBRY - BlackBerry (Covered Call)

GILD - Gilead Sciences (Short Put, Cov Call)

PRAN - Prana Biotech (Covered Call)

NLNK - Newlink Genetics (Short Put)

VJET - Voxeljet (Short Put)

ARWR - Arrowhead Research (Covered Call)

YUM - YUM Brands (Aggressive Short Put)

ILMN - Illumina (Aggressive Short Put)

VJET - Voxeljet (Short Put)

YY - YY Inc (Short Put)

XONE - Exone (Short Put)

QIWI - QIWI Plc (Covered Call)

INCY - Incyte (Covered Call)

NUS - NuSkin (Short Put)

FEYE - FireEye (Short Put)

AAL - American Airlines (Covered Call)

TKMR - Tekmira Pharma (Covered Call)

NOW - ServiceNow (Covered Call)

FB - Facebook (Long Term Short Put)

CLVS - Clovis Oncology (Short Put)

SLXP - Salix Pharma (Short Put)

LMT - Lockheed Martin (Long Term 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.