Fortunately the market failed to gap down triple digits and remained at resistance all day. We were able to exit three of our plays successfully.
The market graced us with a decent day despite the big gain from last week. The lack of a major decline at the open allowed option premiums to decline on MCP, GMCR and CLF and we were able to exit all three short puts at our target prices for a profit.
While the market hang time today was bullish there is still the potential for a bout of profit taking as the week progresses. Even though we exited three plays for a profit I am not ready to rush back into new positions until we either get a dip or a breakout over resistance.
Be patient. There is always another day to trade as long as you have capital with which to trade.
Current Position Changes
MCP - MolyCorp (Short Put)
The MCP July $47.50 put hit our target of 20-cents for an exit to give us a gain of 73-cents.
GMCR - Green Mountain (Short Put)
The GMCR July $77.50 put hit our target price of 15-cents to trigger an exit and give us a gain of 94-cents.
CLF - Cliff's Natural Resources (Short Put)
The CLF July $80.00 put hit our target price of 12-cents to trigger an exit and give us a gain of 70-cents.
New Long Term Recommendations
New Aggressive Recommendations
None until a positive market trend returns
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.