The new mortgage problem weighed on the market on Friday but based on the futures it could really mess it up on Monday.

The mortgage mess pushed the Dow down about 100 points early Friday but the bad news bulls bought dip on the strength in tech stocks. This brought the Dow back to within 31 points of breakeven. Unfortunately the S&P futures are down over eight points on Sunday night so if this holds Monday could be a challenge.

We were stopped out of the Walter Energy and Freeport positions on Friday when the market declined at the open. We lost 30 cents on the FCX position and 50-cents on Walter. Of course they both came back before the market closed just to accentuate the pain of the loss.

Obviously with the futures down significantly I am not going to add any new positions today. If we get a good dip this week I still want to back up the truck and add both November, December and maybe even some January positions to capture a year-end move.

Jim Brown

Current Portfolio

New Recommendations


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.