The two times we have been stopped out of a number of positions over the last two months were both time the market imploded on a -5% loss on China's exchange.
The gap down open along with a -$2.50 drop in oil prices forced a stop on five of our seven positions. The only survivors are Hartford and Continental Resources. Fortunately we tightened up the stops last week and none of those stopped positions lost money. We came close but escaped the executioner's axe one more time.
The two stocks on the watch list were too strong to drop the buck or so needed to hit our entry triggers. American Express (AXP) came close with a drop to $33.47 intraday but failed to hit the $33.25 trigger. Travelers (TRV) dipped only slightly to $49.05 at the open then had the audacity to charge off to a new high and a +81 cent gain. Obviously that kind of strength is what we want in the portfolio but I really hate to chase it with all the correction talk today.
I am not going to add any new plays tonight but I am going to move the entry trigger higher on Travelers in hopes of an eventual dip.
We still have open long puts on WLT and EMN so I will be placing stops on those puts. This is the long half of those stopped out spreads and I suggested not closing the longs in case the decline increased.
On Eastman (EMN) close the long put with a touch of either $52.75 or $51.00.
On Walter (WLT) close the long put with a touch of either $52.50 or $50.50.
Change the stop on Hartford (HIG) to $23 for both legs.
On Continental (CLR) change the stop for both legs to $34.50
On Travelers (TRV) use a touch of $49.50 by TRV as a trigger to enter this position.
Sell September $50 Put TRV-UJ, initial stop loss $49.00.
On American Express (AXP) use a touch of $33.25 by AXP as a trigger to enter this position.
Sell September $35 Put ABZ-UG, initial stop loss $32.25.
New Recommendations - Conservative
TRV - Travelers - Entry trigger $49.50 Sell Sept $50 Put TRV-UJ, Stop $48.50
AXP - Amer Express- Entry trigger $33.25 Sell Sept $35 Put ABZ-UG, Stop $32.25
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)