The portfolio news from last was both bad news and good news depending on your viewpoint.

The Dow declined nearly 400 points last week and the S&P dropped back to strong support at 1,840, a decline of -43 points. The bad news is that we were stopped out of two positions in GILD and ILMN. The good news is that we were ONLY stopped out of two positions. The rest of our short puts did very well.

PII, AGN, AVG and SLXP moved to new highs with CLVS flat and ARUN the only declining position. In the really bad market we had last week I view that as outstanding. Some of the covered call stocks did decline so it was not a perfect week.

We have a lot of March positions expiring on Friday so be prepared to be called away if you have covered calls.

I am being cautious in play selection today because I am not confident the market is done going down. Today was mostly short covering and the FOMC meeting is this week. I don't want to back up the truck and load it with positions until we see a positive market trend.

I have added a couple links below the portfolio graphics to the result statistics for 2013-2014.

Jim Brown

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Current Portfolio


Current positions

Covered Calls

Long Term Positions


Past performance

Click for 2014 Statistics

Click for 2013 Statistics


Current Position Changes


Stop loss updates

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


GILD - Gilead Sciences (Stopped)

Gilead collapsed through support on Friday and knocked us out of the position with a loss. This is part of the breakdown in the biotech sector. Gilead stopped on the 100-day average and this should be support but we need the biotechs to find a bottom before we attempt a new entry.

Closed May $75 put, entry $2.75, exit $4.26, -1.51 loss



ILMN - Illumina (Stopped)

For the last six months Illumina has been bullet proof. Apparently its armor rusted because it has fallen from $183 to $159 over the last two weeks. Fortunately our March put had already decayed significantly and we still made a decent profit despite being stopped at $162.35.

Closed Mar $160 Put, entry $7.50, exit $2.70, +4.80 gain.



INCY - Incite Corp (Close)

We have an April $70 covered call on INCY and the stock has collapsed with the biotech sector. We entered the position with INCY at $67 and it has declined to $62. Normally I would just close the call and write a new call to offset our loss until INCY recovers. However, the stock has declined to two-month support at $61 and could collapse at any time. Rather than try to work myself out from a lower level I am recommending we take our lumps here and exit the play.

Close INCY shares, entry $67.27, currently $62.22, -5.05 loss
Buy to close INCY Apr $70 call, entry $4.20, currently $1.35, +2.85 gain.
Net loss -2.20.



GILD - Gilead Sciences (Close/Rewrite)

We have a March $80 covered call on Gilead that is out of the money. Rather than close the position I want close the March call and write a new May $80 call. Gilead is resting on its 100-day average and I expect a bounce if the sector can find a bottom. If Gilead rebounds to $80 by May we will make about $6.65.

Buy to close March $80 call, entry $3.95, currently .08 cents, +3.88 gain.
Sell to open May $80 call, currently $2.66, no stop.



New Short Put Recommendations


PRAN - Prana Biotechnology

On Monday Prana completed its second day of rebound from the two weeks of declines. It bounced exactly off the support of the 50-day average at $9. The put premiums are very high for a $10 stock. We already have a covered call on PRAN.

Earnings: Unknown.

Sell short PRAN April $9 Put, currently $2.00, no stop.



New Covered Call Recommendations


MOBI - Sky-Mobi Ltd (Covered Call)

MOBI announced a strategic partnership with the Wo Store of China Unicom. That is the app store of the second largest mobile operator in China. Shares spiked +12% on Monday. The trend over the last month has been solidly higher. Today's spike may see some profit taking but I think the trend will continue. Short seller Citron research is actually long this stock and they put out a report today saying it had turned the corner and was heading higher.

Earnings May 12th, AM

I am going to recommend the April $10 call, which is in the money. We should see the stock dip at the open and closer to $10. The option premium is $2 which gives us decent protection against a bigger dip. We should make at least $1 on this trade if not more and this is a $10 stock. That is a very good return.

Buy-write MOBI-Apr $10 Call, currently $11.13-$2.00, no stop.



New Aggressive Recommendations


DDD - 3D Systems

3D issued a profit warning back in early February and crashed back to the $60 level before quickly rebounding. The market decline over the last two weeks and the fade of the momentum stocks knocked DDD back to that $60 level where it has rested for the last four days. I believe that support could hold and a rebound begin from here. There was a slight gain on Monday of $1.22. I am labeling this aggressive because the April strike is right at support. We will be using a stop just under the $60 level.

Earnings May 30th, AM.

Sell short April $60 put, currently $3.35, stop loss $59.25.



GMCR - Green Mountain Coffee

GMCR announced a new deal with Starbucks last week and shares rebounded nearly $10 because it reinforces the validity of the K-cups and broadens the available market. This deal with Starbucks adds additional products with a name brand. There is also the deal with Coke to produce a cool drink dispenser as well. While GMCR may not immediately regain the $125 level from February I think it will get there.

Earnings May 7th, PM, before May expiration.

This is a long term position. You can pick the May $110 put at $7.70, which is currently out of the money or the $120 put at $13, which is in the money. The official recommendation is for the $110 put.

Sell to open GMCR May $110 put, currently $7.70, no stop.



New Long Term Recommendations


KNDI - Kandi Technologies Group (Long Term Call)

Kandi is a maker of electric cars in China. Sales are exploding. They posted earnings today that rose +260% on revenue that rose +92%. They are building a network of 750 automated garages for electric cars across China. This will allow them to expand their automated rental system where people walk up, rent a car for a few hours and then return it all automatically.

Shares of KNDI rocketed +23% on earnings today. I believe the stock will see some profit taking but the history has been short periods of profit taking after blowout earnings and then another move higher. I am recommending we well the in the money (ITM) $20 call for June, which is currently $4.40. If Kandi moves higher we will net $3 in premium on a $20 stock. If Kandi moves lower we are protected because of the $4 premium and we can resell a new call a couple months from now. Meanwhile the premium dollars sit in our account drawing interest or at least offsetting any margin interest you may be paying.

Buy-write KNDI-June $20 Call, currently $21.41-$4.40, no stop



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)

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)

ARWR - Arrowhead Research (Covered Call)

YUM - YUM Brands (Aggressive Short Put)

ILMN - Illumina (Aggressive Short Put)

INCY - Incyte (Covered Call)

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)

GILD - Gilead Sciences (Short Put)

ARUN - Aruba Networks (Short Put)

AVG - AVG Technology (Short Put)

AGN - Allergan (Aggressive Short Put)

PII - Polaris Industries (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.