The S&P closed at 2,119 and only 12 points away from a new closing high in a very low volume session.

Where did the sellers go? We were seeing every bounce sold hard last week and now we are seeing every dip bought and lifted to a higher high. There was some serious resistance on the Dow at 18,000 on Tuesday but that was pierced at the open on Wednesday and then again around 2:30. Both times sellers pushed the index back below 18,000 but the buy on close orders succeeded in lifting the index back to 18,005 at the close. That resistance still exists but it is weakening.

The S&P gapped up at the open on short covering to almost 2,120 and then fell back to 2,112. The rest of the session was choppy until a surge at 2:30 again hit that 2,120 mark. The close at 2,119 was only one point off the high. The historic high close is 2,130.82 putting today'c close only about 12 points from a new high.

Traders are fixated on that high and without some ugly headline, the odds are good we will reach that level. However, the S&P has failed at these levels multiple times since last May. The current string of green candles is showing no indication of a pending decline but you know there is a bout of profit taking here somewhere.


The Dow remains the weaker of the two indexes but the close over 18,000 was a milestone we have not seen since April. The high in April was 18,167 so we still have a ways to go before a breakout occurs.


The volatility remains very low because of the repeated market gains. Once a bout of profit taking appears, it could spike quickly.

The month of June historically starts off slow with a positive bias then peaks in expiration week. After expiration the market weakens and normally closes June near the lows for the month. Past performance does not guarantee future results. Every month is different but we are definitely overbought after the three-week rally.

Anyone receiving this newsletter can use any of the recommendations. Just because you may be a Cash Machine subscriber does not mean you cannot use the Option Writer plays. You have a lot more options in this newsletter format.

Jim Brown

Send Jim an email



Current Portfolio


The fourth column in the portfolio graphic is the earnings date. We will always exit a position before that date unless specifically mentioned otherwise in the play description. For the plays where we will not exit I added the No-X designation in the portfolio.

Lines in blue were previously closed.

Current positions

Covered Calls

Monthly Cash Machine



Current Option Writer Position Changes


CP - Canadian Pacific (Stopped)

Strong rebound from oversold conditions stopped us out on the short call. The $155 long call is way out of range so it will be expiring unless a miracle occurs. This was a good trade!

Closed Jun $145 short call, entry $2.69, exit .08, +$2.61 gain
Expiring Jun $155 long call, entry .60, expiring, -.60 loss
Net gain $2.01.



EGRX - Eagle Pharma (Stopped)

Shares collapsed with a $10 drop last Friday on what could have been an ASCO related drop. There was no specific news. CLOSE THE LONG PUT. I do not expect shares to fall enough to increase the price.

Closed June $35 short put, entry $3.42, exit $1.50, +$1.92 gain
Close June $25 long put, entry .85, currently .15



MDVN - Medivation (Stopped)

Shares dipped below support on Monday in a post ASCO drop to stop us out at $59.50. Retain the long $45 put just in case the acquisition offer self destructs.

Closed June $55 short put, entry $1.40, exit .55, +.85 gain.
Retain June $45 long put, entry .40, currently .05.



AMZN - Amazon (Stopped)

Amazon shares just keep moving higher and they spiked to $731.50 on Monday to stop us out on the short call. Retain the long call because a market breakout could send Amazon higher.

Closed June $750 short call, entry $2.21, exit $3.23, -1.02 loss.
Retain June $765 long call, entry .99, currently .38.



NXPI - MXP Semiconductor (Stopped)

Shares of NXPI fell from $94 to $90 on no news to stop us out on the 6th. This was a July position so we will definitely retain the long $77.50 put just in case the decline continues. If NXPI reverses back to the upside we can use that long put as an anchor for a new short position.

Closed July $87.50 short put, entry $1.49, exit $2.45, -.96 loss
Retain July $77.50 long put, entry .44, currently .30.



Monthly Cash Machine Play Updates


SPY - S&P-500 ETF (Stopped)

The S&P just keeps moving higher and our second attempt at a short call was stopped out on the 6th at $211.05. We do not have enough time left in June to try it again and the index is moving against us. Fortunately, the long $215 call is nearly in the money and we could win back our losses on this position. Target $214.75 for an exit.

Closed June $213 short call, entry .62, exit .49, +.13 gain.
Retain June $215 long call, entry .12, currently .27. Exit at $214.75.



New Option Writer Recommendations


PXD - Pioneer Resources (July Put Spread)

Pioneer is an oil producer that is very active in the Permian Basin. They recently said their production costs averaged $31.50 (all in) last quarter. They are the least cost shale producer. They have said if prices remain over $50, they will reactivate 5-10 rigs. They are the only producer that is consistently profitable at low oil prices.

Earnings July 27th.

Sell short July $155 put, currently $2.10, stop loss $159.75
Buy long July $145 put, currently $1.00, no stop loss.
Net credit $1.10.



TSLA - Tesla Motors (July Put Spread)

I am going to double dip again on Tesla because the stock shot up $20 on Tue/Wed after Baron Capital said they could be the largest stock in the U.S. or even the world in the coming years. They have a $300 million position in Tesla and said you could buy it and hold it for 10 years and make an obscene amount of money. Obviously that is one person's opinion but they really spiked the option premiums.

Earnings August 3rd.

Sell short July $205 put, currently $2.02, stop loss $215
Buy long July $190 put, currently .88, no stop loss.
Net credit $1.14.



Other Potential Plays (July Put Spreads)

These are not official plays but a good place to start if you are looking for something else to trade.

Symbol, strikes, premium, net credit, earnings date

N - $75/65 - $1.25/.40 - .85 - 7/28
DPZ - $120/110 - $1.15/.50 - .65 - 7/21
IBM - $120/110 - $1.11/.39 - .72 - 7/18
AVGO - $150/140 - $1.45/.60 - .85 - 8/25
PRGO - $90/80 - $.95/.35 - .60 - 8/04
BWLD - $140/130 - $1.40/.50 -.90 - 7/26
PANW - $125/115 - $1.75/.70 - 1.05 - 8/25
NTES - $160/150 $2.20/1.10 - 1.10 - 8/10

If you want me to continue listing these alternate positions, please send me an email using the link at the bottom of the commentary. Otherwise, I will stop posting them. Just say, Please post extra plays. Thank you!


New Covered Call Recommendations


DRII - Diamond Resorts Intl (Covered Call)

We have played Diamond before with mixed results. Sometimes they were very profitable and once back in March there was an unexpected decline. With premiums this high we need to try it again.

Earnings July 27th.

Buy-write July $25 call, currently $25.07-$2.90, stop loss $22.50
Gain if called $2.83.



New Monthly Cash Machine Recommendations


IYT - Dow Transport ETF (July Put Spread)

The transports have rebounded strongly now that travel season is here. The railroads are also rebounding but I fail to understand the reason. Supposedly the rising price of oil will cause drillers to begin shipping pipe and sand again as well as larger amounts of crude oil. While I doubt that will happen in the coming weeks we could see it months from now.

Sell short July $135 put, currently $.75, stop loss $139.25
Buy long July $129 put, currently .45, no stop loss.
Net credit 30 cents.



XBI - Biotech ETF (Aug Call Spread)

The biotech sector rallied 16% in three weeks ahead of the ASCO cancer conference. Now that the conference is over those same stocks are starting to fade. The XBI hit strong resistance at $60 and is likely to decline over the coming weeks unless the broader market breaks out and overcomes the post ASCO depression.

Sell short Aug $65 call, currently $1.05, stop loss $61.50
Buy long Aug $70 call, currently .35, no stop loss.
Net credit 70 cents.



Existing Option Writer Positions (Alpha by Symbol)

THESE ARE NOT CURRENT RECOMMENDATIONS. These are prior recommendations that are still active in the portfolio. Do NOT act on the plays described in this section. This is the archive of prior recommendations in the current portfolio.


AET - Aetna (July Put Spread)

Aetna is an insurance company and shares are very close to breaking out to a new 8-month high. They caught fire on Wednesday and moved out of a consolidation phase.

Earnings Aug 2nd.

Sell short July $110 put, currently $1.59, stop loss $112.45
Buy long July $100 put, currently .44, no stop loss.
Net credit $1.15


AMZN - Amazon (June Call Spread)

Amazon shares appear to have topped out in the $710-$720 range at least temporarily. They have been on an explosive run since the earnings in April. With the summer doldrums ahead I am going to recommend a high call spread.

Earnings July 28th.

Sell short June $750 call, currently $2.23, stop loss $730.00
Buy long June $765 call, currently $1.07, no stop loss.
Net credit $1.16.


CP - Canadian Pacific Railway (June Call Spread)

The Canadian railroad is going to be under a lot of pressure from the impact of the wildfire in Alberta. Lumber and oil shipments are going to be depressed. There will be delays and all manner of interruptions. It could be weeks before everything is back to normal. Earnings are going to suffer.

Earnings July 20th.

Sell short June $145 call, currently $2.20, stop loss $141.85
Buy long June $155 call, currently .65, no stop loss.
Net credit $1.55


CYTR - CytRx Corp (Covered Call)

It is going to be very hard to lose money on this position. It is possible but not likely.

CytRx is a biopharmaceutical research and development company specializing in cancer drugs. They will be presenting three abstracts this weekend at the ASCO cancer conference. Shares have been jumping around between $2 and $3.50 since March. With the conference this weekend the options are high.

Earnings August 3rd.

Buy-write CYTR July $3 call, currently $2.93-$1.00. No stop loss.


EGRX - Eagle Pharmaceuticals (June Put Spread)

Eagle posted a terrible earnings report on May 9th but their guidance was strong. Their lead drug hit 71% total market share and 77% market share among hospitals and clinics. They partnered with Teva on the drug and Teva is doing the marketing Teva feels confident it will hit 90%. They also entered into an agreement to sell diclofenac-misoprostsol to a third party for $1.75 million and a 25% royalty on the net profits. Shares are exploding higher.

Earnings Aug 11th.

Sell short June $35 put, currently $3.30, stop loss $39.25
Buy long June $25, currently $1.15, no stop loss.
Net credit $2.15.


LNKD - Linkedin (June Put Spread)

Linkedin reported strong earnings, guidance and the internal components on users, page views, jobs, etc were also strong. Shares spiked on the news and then declined slightly in the weak market over the last two days. I believe they are going higher.

Earnings July 28th.

Sell short June $110 put, currently $1.38, stop loss $117.65
Buy long June $95 put, currently .28, no stop.
Net credit $1.10


MDVN - Medivation (June Put Spread)

Medivation is under attack by Sanofi. They are trying to buy the company for $52.50 despite the valuation being much higher. Medivation will not meet with Sanofi or open their books. Sanofi said they would raise the bid if Medivation would talk to them. Meanwhile Medivation is talking to Pfizer, Amgen and AstraZeneca about a possible white knight acquisition to save Medivation from Sanofi.

Sanofi is going to propose a slate of 8 directors to replace the entire Medivation board. Analysts claim a fair price would be in the $63 to $71 range.

Earnings August 4th.

Sell short June $55 put, currently $1.50, stop loss $58.50
Buy long June $45 put, currently .51, no stop loss.
Net credit 99 cents.


N - Netsuite (June Put Spread)

Netsuite reported earnings that missed estimates but revenue was higher than expected. Shares retreated from their highs but found support at $75 after Credit Suisse put a buy rating on the stock.

Earnings July 28th.

Sell short June $70 put, currently $1.50, stop loss $73.85
Buy long June $60 put, currently .50, no stop loss.
Net credit $1.00.


NXPI - NXP Semiconductors (June Put Spread)

NXP Semiconductor provides high performance mixed signal and standard product solutions for radio frequency, analog and digital processing products worldwide. That means they make chips for cell phones and other communication devices.

The price target for NXPI was raised from $102 to $115 at Drexel Hamilton today after the company beat estimates for earnings. They posted earnings of 1.14 compared to estimates for $1.09 and revenue of $2.22 billion also beat.

Earnings July 25th.

Sell short June $80 put, currently $1.10, stop loss $83.85
Buy long June $65 put, currently .20, no stop loss
Net credit 90 cents.


NXPI - NXP Semiconductor (July Put Spread)

NXPI is a semiconductor company and the stock is on fire. Shares closed at a new six-month high on Wednesday.

Earnings July 27th.

Sell short July $87.50 put, currently $1.35, stop loss $90.25
Buy long July $77.50 put, currently .35, no stop loss.
Net credit $1.00.


RLYP - Relypsa (Covered Call)

Relypsa is a biopharmaceutical company, focuses on the discovery, development, and commercialization of polymeric medicines for patients with conditions that are overlooked and undertreated and can be addressed in the gastrointestinal tract primarily in the United States.

On Friday a competing drug from AstraZeneca was rejected by the FDA and RLYP shares soared. The drug treats high potassium levels in the blood, which can be fatal. RLYP's drug Veltassa was approved last October so the rejection of AstraZeneca is a very big deal for RLYP.

Today Mizuho upgraded RLYP from underperform to neutral saying there was a good chance RLYP could be acquired. Shares rose another 4%.

Earnings August 4th.

Buy-write RLYP July $20 call, currently $19.86-$2.90, stop loss $15.45.


STZ - Constellation Brands (June Put Spread)

Constellation blew out earnings in early April and spiked to $160. Since then they have traded in a $5 range with support at $155. Despite the weak market, shares have moved back up to $160 in the last week. I expect them to break out the next time the market turns positive.

Earnings June 30th.

Sell short June $150 put, currently $1.45, stop loss $153.85
Buy long June $135 put, currently .40, no stop loss.
Net credit $1.05.


TSLA - Tesla Motors (June Put Spread)

Tesla just sold $2 billion in stock in a secondary offering at $215 and did not have any trouble placing the shares. The odds are very good we are not going to see a big decline with that kind of demand.

Earnings Aug 3rd.

Sell short June $195 put, currently $1.40, stop loss $202.50
Buy long June $175 put, currently .40, no stop loss.
Net credit $1.00.


WLL - Whiting Petroleum (Covered Call)

With the first decline in crude inventories for the summer demand season the energy stocks popped once again. Whiting has support at $10 and closed at $11. Crude prices should begin to move slowly higher as demand increases. May is the lightest month of the year and August the highest at 2.0 mbpd more than May. With the outage in Canada inventories should continue to decline.

Earnings July 27th.

Buy write WLL June $11 call, currently $11-$1.20, stop loss $9.75
Gain if called $1.20.


WYNN - Wynn Resorts (June Put Spread)

Wynn Resorts beat on earnings despite the continued weakness from Macau. However, the decline in revenue from Macau has slowed significantly and the outlook is improving.

Earnings August 4th.

Sell short June $82.50 put, currently $1.55, stop loss $86.50
Buy long June $72.50 put, currently .39, no stop loss.
Net credit $1.16

Update 5/25: WYNN - Wynn Resorts (Short Put - Closed/Reload)

Last week I recommended closing the short put on the WYNN spread because the stock was breaking down. The stock gapped lower on Thursday to $87.25, we closed the put, and that was the low for the month. The stock immediately sprinted higher to close at $97 today. Since we still have an offsetting long put I am recommending we sell a new put on WYNN to recover our loss.

Sell short June $87.50 put, currently .84, stop loss $90.50

Closed June $82.50 short put, entry $1.43, exit 2.05, -.62 loss.

Retain June $72.50 long put, entry .43, currently .05.


WYNN - Wynn Resorts (July Put Spread)

I hate to keep playing WYNN over and over again but they have great premiums and there is no reason not to double dip. We have a June position and this will be a new one for July.

Earnings Aug 4th.

Sell short July $85 put, currently $1.48, stop loss $90.85
Buy long July $75 put, currently .42, no stop loss
Net credit $1.06.


Existing Monthly Cash Machine Positions

THESE ARE NOT CURRENT RECOMMENDATIONS. These are prior recommendations that are still active in the portfolio. Do NOT act on the plays described in this section. This is the archive of prior recommendations in the current portfolio.


DIA - Dow ETF (June Put Spread)

Expectations are for a declining market into June but the speed of the decline has slowed, except for today, and there is significant support at 17600, 17500, 17400. If it breaks those levels we could see 17,000. However, every dip continues to be bought. I am recommending a very low put spread and we will stop out well above our strikes if the market breaks those support levels.

Sell short June $165 put, currently .62, stop loss $169.50
Buy long June $159, currently .32, no stop loss.
Net credit 30 cents.


MDY - Midcap SPDR ETF (June Put Spread)

Midcap stocks have been strong, even more so than the small caps. The midcap index is only 1 point away from a 10-month high. We have not tried this ETF before but it was the only one with any premium at a relatively safe strike this week.

Sell short June $255 put, currently .50, stop loss $261.50
Buy long June $240 put, currently .20, no stop loss.
Net credit 30 cents.


$OEX - S&P-100 (July Call Spread)

June is typically a bad month for the markets. Historically it is flat to down in the first half, peaking at option expiration then down sharply in the last half of the month. July is also historically weak. The S&P-100 has been struggling to move over $940 for more than a year. The odds are slim that it will accomplish this feat in June or early July. I am proposing a call spread from $965 to $980 for a 45-cent credit. In order for the $OEX to move to $960 that would be the equivalent of 2,175 on the S&P-500.

Sell short July $965 call, currently .95, stop loss $946.
Buy long July $980 call, currently .45, no stop loss.
Net credit 45 cents.


QQQ - Nasdaq 100 ETF (June Call Spread)

The market appears to be headed lower and on each of the recent short squeezes the QQQ has failed at $107. Support at $105 is likely to break before the week is out.

Sell short June $109 call, currently .49, stop loss $107.45 (three-week high)
Buy long June $112 call, currently .09, no stop loss.
Net credit 40 cents.


SPY - S&P-500 ETF (June Call Spread)

The S&P has made a series of lower highs and lower lows and broke critical support intraday today at 2,040. ($204). We are heading into the end of May and into the summer doldrums after Memorial Day. The S&P is likely to break that 2,040 level this week and move lower. The three week high on the SPY is just over $208. We had three monster short squeezes over the last three weeks and none of them lasted more than 1 day. The path of least resistance is down.

Sell short June $211 call, currently 58 cents, stop loss $208.50
Buy long June $215 call, currently .13, no stop loss.
Net credit 45 cents.

Update 5/25/16: SPY - S&P-500 ETF (June Call Spread - Stopped/Reload)

Who knew the SPY was going to sprint 6 points higher in only 4 days to stop us out? The S&P blew through resistane at 2,075 and touched 2,095 today. That knocked us out of the $211 short call. We can sell a $213 call with strong resistance at $211 to recover the 56 cents we lost on the initial position. That of course assumes the market is not going higher and we will have to put a tight stop on it.

Sell short June $213 call, currently .57, stop loss $211.05

Closed June $211 short call, entry .49, exit $1.05, -.56 loss.

Retain June $215 long call, entry .12, currently .23.


XBI - Biotech ETF (June Put Spread)

While the biotech sector is in decline, the index is approaching very strong support. On the XBI that support is at the $48-$50 level. I am recommending a spread below the February lows so without a total market meltdown we should be ok.

Sell short June $43 put, currently .70, stop loss $46.85
Buy long June $38 put, currently .25, no stop loss.
Net credit 45 cents.


XLE - Energy ETF (June Put Spread)

Crude inventories should begin declining over the next couple weeks as refiners kick into high gear to fill up the system with summer blend gasoline for the driving season. Typically when that happens the price of oil rises along with energy stocks. The decline in oil prices over the last couple days has been related to a rebond in the dollar rather than oil fundamentals.

Sell short June $58 put, currently, .56, stop loss $61.85
Buy long June $53 put, currently .20, no stop loss
Net credit 36 cents.

Update 6/1/16: With the OPEC meeting on Thursday I am taking the precaution of closing the XLE and XOP short positions. Anything can happen at that meeting and crude prices could implode or explode. Both short puts have declined to 6 cents or less so there is no reason to continue holding the risk. Retain the long puts in case disaster happens.

Close XLE June $58 short put, entry .48, currently .05, +.43 gain.

Close XOP June $29 short put, entry .27, currently .06, +.21 gain.


XOP - Oil Exploration ETF (June Put Spread)

With oil prices likely to rise in the coming weeks due to inventory declines, I think it is safer to have two active spreads on the oil ETFs.

Sell June $29 put, currently .32, stop loss $31.85
Buy long June $25 put, currently .05, no stop loss
Net credit 27 cents.

Update 6/1/16: With the OPEC meeting on Thursday I am taking the precaution of closing the XLE and XOP short positions. Anything can happen at that meeting and crude prices could implode or explode. Both short puts have declined to 6 cents or less so there is no reason to continue holding the risk. Retain the long puts in case disaster happens.

Close XLE June $58 short put, entry .48, currently .05, +.43 gain.

Close XOP June $29 short put, entry .27, currently .06, +.21 gain.


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.