Fear of the Fed took hold this morning and the Dow lost -150 points at the open. Fortunately traders and fund managers bought the dip again and succeeded in pushing the Nasdaq over 2500.

The holding pattern was derailed this morning by worries the Fed would not do a major quantitative easing program and just keep making token purchases in an effort to minimize balance sheet risk.

As I have been telling everyone for a couple weeks the market has priced in another $500B to $1T of QE so anything less than that is going to be unpleasant.

The morning drop was also pushed by a sharply rising dollar. The dollar index rose to its highest level in a month and that crushed commodities.

We were stopped out of CTRP and WLT at the open for a total loss of 9-cents so the damage was very manageable. The remaining positions rallied strongly in the afternoon rebound with FSLR +2.15, VMW +2.83, CRM +3.20 and putting them well above our stops. WYNN lost 58-cents but is still holding above the stop.

If we can get an end of month rally the next two days we should see the premiums shrink significantly. Be sure and check the newsletter on Thursday night. If we do see some gains I am going to keep pushing the stops higher because next week could be rocky.

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)