The Nasdaq drop today was the first loss in nine trading days. The Nasdaq and the market in general were due for a rest.
The Nasdaq declined +12 points as some of the large momentum stocks like NetFlix saw some serious profit taking. Still the damage was minimal and with the FOMC meeting on Tuesday we could have expected the pause to reload. The Nasdaq announced Netflix is also being added to the Nasdaq 100.
Netflix dropped $10 despite the addition to the S&P. There was a downgrade and continued worry over future competition. Given the size of the decline and the negative press I am dropping NFLX as a potential trade.
FFIV declined -$4 on no specific news so I dropped the strike one notch and put it back on the list for Tuesday.
Check the portfolio graphic for new stops.
Current Position Changes
NFLX - NetFlix (Cancel entry)
NetFlix was crushed by another downgrade on Monday and opened negative to cancel the entry. I am dropping this recommendation from the list. We don't need $10 drop risk in our portfolio.
FFIV - F5 Networks $139.06
Let's try this one again. The dip was back to support and it should give us a better entry. Thanks to the dip we can drop our strike n\one notch and get the same premium with less risk.
FFIV will be added to the S&P-500 after the close on Friday. With a relatively small number of shares outstanding the stock should move higher as funds add to their holdings.
Enter this trade only if the S&P and FFIV are positive
Sell Short FFIV January $130 Put (FFIV11M13000) currently $4.90, stop $135.25
Chart of FFIV
New Long Term Recommendations
None - Waiting for a "real" market dip
New Aggressive Recommendations
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.