The bulls ran out of liquid cheer and the hangover started before the morning was even over. Heck of a way to kick off the July option cycle.
The lackluster market rallied right to resistance on the S&P-500 at 1105 and died. It was though they presented their ticket to the rally and the gatekeeper denied it. There was not even a credible attempt to crash the gate. This was fairly depressing given the two-day ramp late last week. I thought sure the bulls would at least make a decent try before giving up.
We achieved entry on all but one position. SalesForce.com (CRM) was positive for a few seconds but in the time it took to enter an order it was already negative and dropping fast. Positive for only 15-20 seconds at the open is not really a positive open in my book. If you are waiting to confirm the stock opened positive I hope you required a little more confirmation than that.
I am placing the CRM trade on hold. Maybe after a three-day rally it simply needed to take a rest. I am also leery of the market again and don't want to throw good money after bad. I will let you know when/if we should try again.
Check the stops in the graphic. I tightened some because of the market weakness.
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.