Despite a worse than expected payroll report the market rallied again and closed right at a potential breakout point.
The indexes slowly crept over resistance at 1300 and 12000 but failed to do it with any conviction. Personally I am fine with a slow melt up rather than a blast higher and then three days of profit taking. Slow and steady wins the race.
We do have some risk for next week with earnings winding down and almost no economics on the calendar of any importance. Volume is declining because the rally continues to get no respect. The bears are raising their voices as they predict top after market top to no avail. Eventually they will get it right. We need to keep our stops tight and be ready to bail when this happens whether it is this Monday or a Monday two weeks from now.
We exited the First Solar position at the open on Friday for 26-cents and a nice gain.
F5 Networks rambled higher once again for a better than $5 point gain to push our position farther into a profit.
I found four more stocks I was willing to take a chance on even with the market lacking conviction. Once in these positions we will snug up the stops and follow the trend.
Current Position Changes
CRM - SalesForce.com $84.56 (Short Put)
SalesForce has been recovering for the last two weeks after a -$25 point drop on some bad news in the sector. CRM appears to have shaken off the news and is returning to retest its highs. Earnings are not until Feb-24th so plenty of time.
Because of the volatility in CRM we are able to sell a strike $18 off the stock price for a hefty premium. That give us a wide margin of error.
Enter position ONLY if S&P and CRM are positive.
Sell Short March $120 put, currently $2.80, stop $132.25
Chart of CRM
DECK - Deckers Outdoor $80.97 (Short Put)
Deckers was hammered in January on inventory accumulation issues but appears to be rebounding after the retail sales reports showed a strong January for consumers.
Like CRM we can sell a strike well away from the stock price to give us some decent protection.
Enter position ONLY if S&P and DECK are positive.
Sell Short March $70 Put, currently $1.45, stop $75.25
Chart of Deck
APKT - Acme Packet Inc $69.94 (Short Put)
Acme exploded higher on Wednesday after the company raised its revenue and earnings guidance. The stock was up about 400% over the last year but took a hit in mid January on the F5 earnings miss. Acme says it is an F5 problem not an Acme problem.
Enter position ONLY if S&P and APKT are positive.
Sell Short March $60 Put, currently $1.65, stop $63.50
Chart of Acme
FCX - Freeport McMoran $56.79 (Short Put)
Freeport had a 2:1 split on Feb-1st and the option premiums are still pumped from the ride down from $120 before the split. With a lower stock price the volatility in the premiums should decline fairly rapidly.
Enter position ONLY if S&P and FCX are positive.
Sell Short March $52.50 Put, currently $1.28, stop $54.75
Chart of FCX
New Long Term Recommendations
None - Waiting for a "real" market dip, not a one day wonder
Current Aggressive Recommendations
January Recommendation History
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)