The market is providing us a very tough set of circumstances and high percentage trading opportunities are tough to predict.

On Sunday night the S&P futures were down sharply and it looked like we could break support on Monday. We scheduled a play on the expected increase in volatility for Monday. Instead, futures reversed and the Dow gapped +200 points high at Monday's open. Our volatility play on the VIX was triggered at the low for the day. Before the day was over the Dow declined on steady selling to the low of the day only minutes before the close. It appeared we were right back at support and another breakdown was imminent.

Monday night futures were down -20 points so definitely no play recommendations for Tuesday. Futures reversed again and despite some bad economic news at the open the market rallied and shorts were squeezed. The Dow rallied for +322 points to go from oversold to over bought in only one day and definitely not an environment in which we want to make bullish plays.

Wednesday was neutral with futures erratic overnight and the opening +175 point spike in the Dow erased by lunchtime and the Dow in negative territory. Somebody bought the dip again and the Dow posted another 143-point gain.

We definitely have higher volatility and I am not comfortable launching naked put positions in this environment. The market has now overpriced the potential for a Bernanke surprise in his speech on Friday. The odds are very good we will see a "sell the news" event if the speech does not satisfy investors with either a stimulus program of some sort or a bullish cheerleading session that improves investor outlook on the economy. I view the odds of a continued rally after the speech as slim. In fact, I view the potential for some profit taking before the speech as pretty good.

In this environment I am going to pass on new positions again tonight. Futures are down again and I don't have high hopes for a continued rally. The Dow and S&P are approaching strong resistance so even without a Bernanke speech there is the potential for profit taking.

Jim Brown

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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)