The strong gap higher this morning filled us at the low for the day on the new positions but gave us a little more insurance on the existing portfolio.

The big opening gap this morning was another example of the wrong time to enter new positions. The gap removes all the put premiums to fill us at the low of the day and then the stocks fade and premiums rise to put us in a losing posture.

On the flip side we saw some critical resistance broken so we really can't complain. The Dow came within eight points of a new post recession high and the S&P advanced to 1330, which happens to be the last material resistance level before moving to a new high.

With only one day left in the quarter I would expect Thursday to be flat to higher. Friday is a tossup because of the new quarter and the NonFarm Payrolls. Next week will be real key. If the market is going to decline again we could see weakness by midweek. I will tighten stops on Thursday night.

No new plays today.

Jim Brown

Current Portfolio

Current positions

Current Position Changes


New Recommendations


New Long Term Recommendations


New Aggressive Recommendations


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)

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.