Our current positions all closed at new highs on Friday except for the aggressive play on FFIV, which was only a four-week high. You could not ask for a better portfolio today!
Assuming the market does not take a breather on Monday we should hit the exit target on Mosaic at 25-cents. The other positions are not quite so close but a couple more days as February options wind down and we could be exiting those as well.
I am adding another aggressive play this week using CREE. After 3-4 weeks of lethargic consolidation it is finally showing signs of life again. I like to find companies that have stumbled as candidates for aggressive positions.
The market won't give us a break so we can establish some longer-term positions. Even the Egyptian crisis failed to slow the bull. I can't wish too hard for a decent dip until we exit our current positions. We have a lot of profit potential and I would hate to give it back.
While we wait for premium to decay I will keep watching for some new entries but don't expect a long list because this market has to correct for at least a few days sometime soon.
Current Position Changes
LULU - Lululemon Athletica $84.31 (Short Put)
LULU has broken out from a two month consolidation pattern after strong earnings. Analyst upgrades are flying and the stock appears unstoppable. I would not normally play this strong of a breakout but we can get a $10 spread from the strike and the price and some good support for stops in the middle.
Enter this position ONLY if the S&P and LULU are positive
Sell Short March $75 Put, currently $1.50, stop loss = $80.25
Chart of LULU
New Long Term Recommendations
None - Waiting for a "real" market dip, not a one day wonder
Current Aggressive Recommendations
CREE - CREE Inc - $55.41 (Short Put)
Cree missed earnings back in mid January after a large order from China for street lamps was delayed. There are various theories making the rounds but the predominant one is Cree eventually getting the business over the next couple quarters.
The stock took a serious hit in January and lost about $17 to support at $51 where it languished for three weeks. Cree has been up the last two days on positive analyst chatter about the business from China.
I believe the earnings miss was a one time deal and now that Cree has consolidates in the low $50s it is ready to return to its prior level around $70. It may take a few weeks but I think it will get there.
I am recommending an aggressive position on CREE using the June $65 put.
Enter this position ONLY if the S&P and CREE are positive
Sell Short CREE June $65 Put, currently $11.40, stop $50.50.
Chart of CREE
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)