With one week left in January options I believe we can squeeze some premium out of some February positions as they become front month.

I waited on the sidelines all week and very few stocks declined. The S&P broke over 1280 and the Dow over 11750. The Russell moved over 800. The bulls are in charge and I don't want to be left standing at the station as the train pulls out.

I don't want to add many positions and I am only planning on being in them for a week. Once we get past option expiration and the premiums have shrunk I am going to tighten the stops significantly in anticipation of a period of post earnings depression.

With Apple, IBM, Google and Ebay reporting this week I chose high dollar tech stocks with strong trends that are likely to react positively to the earnings from those tech giants.

After researching over 200 stocks my short list looked like this:

Stock Price Strike Premium
VMW $97 $90 $2.25
MSTR $91 $85 $2.05
FFIV $144 $130 $3.50
BIDU $108 $100 $2.26
CRM $147 $135 $2.70
FSLR $141 $130 $3.05

I chose FLSR, CRM, BIDU and VMW because of their strong charts and beta to the Nasdaq.

Jim Brown

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Current Portfolio

No Open Positions

New Recommendations

VMW - VMWare $96.94

VMW is moving out of a period of consolidation at recent highs and broke above this consolidation level on Friday. We have played VMW several times in the past and the strong trend is our best insurance.

Earnings are Jan 24th after the close so we need to be out by Monday's close. Revenue has increased over 40% each of the prior two quarters so expectations will be high.

Do not enter the play unless VMW and S&P are positive.

SELL February $90 Put (VMW11N9000) currently $2.25, stop $94.25

Chart of VMW

CRM - SalesForce.com $146.42

Salesforce.com broke out of weeklong consolidation on Friday to a new six week high. Odds are good it will not fall back below that consolidation support. The strike I picked is nearly $12 below the current price. You could even go one lower at $130 if you are looking or a little more safety.

Earnings Feb 24th so plenty of time but we are only trying to get into next week and shrink the premium enough to bail for a profit.

Do not enter the play unless CRM and S&P are positive.

SELL Feb $135 Put (CRM11N13500) currently $2.70, stop $139.75.

Chart of CRM

BIDU - Baidu Inc $107.71

Like the other candidates BIDU is breaking out of weeklong consolidation and trying to move higher. There is good support at $105 and the strike to play at $100 is well out of immediate danger short of some very unpleasant news. One worry could be a reaction to a negative earnings surprise from Google on Thursday night. I doubt it will gap down $8 on surprise news from another stock so we should be able to stop out if the worst happens.

Do not enter the play unless BIDU and S&P are positive.

SELL BIDU Feb $100 Put (BIDU11N10000) currently $2.26, stop $104.95

Chart of BIDU

FSLR - First Solar $140.79

First Solar saw a serious decline in December on worries about profits in the solar sector and a withdrawal of subsidies in Germany. On Friday Jefferies said the impending cut of subsidies was not likely to forestall any projects although selling prices would decline. FSLR was already ramping up ahead of the comment so this should be positive for the sector although not necessarily bullish. We have $11 of comfort between our strike and the price.

Earnings Feb 11th so plenty of time.

Do not enter the play unless FSLR and S&P are positive.

SELL FSLR Feb $130 Put (FSLR11N13000) currently $3.05, stop $137.95

Chart of FSLR

New Long Term Recommendations

None - Waiting for a "real" market dip

New Aggressive Recommendations


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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)