The Dow moved over 11,000 but struggled to hold that level. With all the major indexes up only single digits it was less than inspiring.

I tightened all the stops on the new plays. I expected the markets to hold their gains through option expiration but the weakness at the close was slightly unnerving. If they decide to give up here I want to minimize our losses.

Alco was the first Dow component to report earnings and they did so after the bell today. They reported a net loss of 19-cents compares to a 61-cent loss in the year ago quarter. However, the current quarter included a 29-cent charge for health care reform and the closing of two smelters. After excluding charges Alcoa posted a 10-cent profit compared to analyst expectations for 10-cents. Revenue rose +20%. The CEO said markets were improving and prices received for aluminum in Q1 were $2,331 per tone compared to $1,567 a year ago. Alcoa shares decline only slightly in after hours.

Tuesday after the close Intel will report. Those expectations could keep the market positive but it will be up to Intel to blow the doors off their earnings estimates in order to push the markets higher.

Jim Brown

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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 just send us an email and we will use your price.