We were stopped out so quickly on a couple of our prior plays I am going to recommend them again and hopefully the market will cooperate.
I hate to keep recommending the same symbols but in the case of VMW, FSLR and WYNN they have twice the premium of other stocks and a fairly predictable path. The key is not to keep trying different trades just to be trading but to find repeatable trades where we can make a profit.
I am leery of the market next week but the futures are up strongly tonight and I don't want to miss an opportunity. If the futures roll over before the open we won't take the entries.
A couple of these plays may only last for 3-4 days because they have earnings after the close on Thursday. We will decide on Wednesday night on the exit strategy.
AMZN - Amazon.com - $119.00
Amazon dropped from $120 to $100 after its earnings and then fought all the way back on Friday to close at $119. This is a monster rebound and suggests there are plenty of Amazon bulls in the market.
I am picking a strike that is nearly $10 out of the money but still give us $1.85 in premium.
ENTER TRADE ONLY IF AMZN and S&P-500 are positive.
SELL August $110 PUT (AMZN-10T11000) currently $1.85 stop AMZN @ $114.50
Chart of AMZN
CREE - Cree Inc - $72.00
Cree is breaking out of recent congestion and does not have earnings until August 10th. There are a lot of chips stocks with earnings this week and hopefully somebody will say something good to power the sector higher.
ENTER TRADE ONLY IF CREE and S&P are positive.
SELL AUGUST $65 PUT (CREE-10T6500) currently $1.37, stop CREE @ $68.75
Chart of CREE
WYNN - Wynn Resorts - $87.67
We were stopped out on Wynn last week when the market imploded at the open on Tuesday. Wynn has added nearly $10 since that effort. I am recommending the $80 strike and hopefully we won't repeat that exit. Earnings are Thursday after the close so we will have to decide on Wednesday night on whether we should exit.
ENTER TRADE ONLY IF WYNN and S&P are positive.
SELL AUGUST $70 PUT (WYNN-10T8000) currently $1.95, stop WYNN @ $84.50
Chart of WYNN
VMW - VMWare - $78.59
VMWare posted stellar earnings and they are one of the only stocks that rallied after their report. They closed at a new high on Friday.
ENTER TRADE ONLY IF VMW and S&P are positive.
SELL AUGUST $75 PUT (VMW-10T7500) currently $1.65, stop VMW @ $75.95
Chart of VMW
FSLR - First Solar - $140.00
This will be a short play. FSLR reports earnings after the bell on Thursday. We will decide on Wednesday night when to exit the play. With the high premium and nearly vertical movement by FSLR we could see some significant premium decay before Thursday if the market cooperates.
ENTER TRADE ONLY IF FSLR and S&P are positive.
SELL AUGUST $130 PUT (FSLR-10T13000) currently $3.65, stop FSLR @ $135.50
Chart of FSLR
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.