The market rallied on hopes for a resolution to the Japan nuclear crisis and on the announcement of several mergers and acquisitions. Warren Buffett helped by publicly declaring it was a buying opportunity in Japan.
The broken supply chain in Japan was improving in some areas and yet there was still some bad news in others. After a week of sharp declines it appears the optimists were out in force at the open.
Obviously it was another short squeeze of monumental proportions and the market faded after the initial spike. That is three consecutive days of gap and crap but at least today's decline from the highs was not as pronounced.
Unfortunately the S&P screeched to a dead stop at 1300 and a decent psychological resistance level. The 50-day average is 1303. Support late in the day was 1295 and that is positive. The Dow closed a little better and solidly over 12000.
The Nasdaq 100 ($NDX) is still the problem. Despite the +1.87% gain today it remains under resistance at 2275 although it did close 12 points over the 100-day at 2250. That could be a glimmer of hope for the rest of the week.
I think we have a better than 50:50 chance of this trend continuing but I am not holding my breath. We need to see a couple days where stocks are rising at the close rather than declining.
Check the graphic below for new stop losses. Because we gapped so high on the open a lot of our premiums deflated from their weekend levels and we can't afford to maintain a wide stop. I hate entering new positions on a gap higher but that is burden newsletter writers have to bear.
Current Position Changes
See graphic for new stop losses
New Long Term Recommendations
None - Still too much volatility
New Aggressive Recommendations
None - Still too much volatility
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.