Growing resistance to the Syrian incursion and better economics from China were a powerful combination.
The market celebrated multiple events on Monday.
China reported much stronger than expected exports for August.
Analysts believe the market has already prices in a "taper lite" of $10 billion.
Resistance is growing to the Syrian situation and the attack and potential ramifications seems far less likely.
There were no negative economics in the U.S. on Monday.
There were very few headlines about the upcoming debt ceiling and budget battles thanks to the over abundance of Syrian headlines.
The combination of all those events allowed the Nasdaq to break through resistance at 3,692 and surge to a new post 2000 high at 3,705. Shorts were running for cover and it was a good day for the markets.
The Dow recovered 15,000 but even with a +140 point day it remains under decent resistance at 15,100. The S&P eased over 1,665 but got stuck in the secondary resistance trap at 1,670.
Eventually the debt ceiling and budget battle headlines will rise through the Syrian mess but probably not until next week or even later depending on how the Syrian scenario plays out. I don't want to get too long here but you can't fight a bull market.
Fortunately our September and October positions are doing well so we should have a good month.
There is no need to force plays just to have something to do. We have had a good run the last several months so be patient and limit your positions.
Send Jim an email
Long Term Positions - None
Current Position Changes
New Short Put Recommendations
WLT - Walter Energy
Walter Energy has broken out over resistance at $15 and appears poised to retest resistance at $20. Walter is a met coal producer that made a "life changing" acquisition at exactly the wrong time in the coal market in 2011. They weathered the storm, wrote down the asset and now they are poised to move higher. This is especially true with Europe and China apparently improving. More than 50% of Walter's coal goes to Europe and 35% to Asia.
Sell Oct $16 Put, currently $1.68, no stop.
New Covered Call Recommendations
CZR - Caesars Entertainment
Caesars, formerly Harrah's, has had a hard time over the last several years. Investors took it private in a monster LBO just before the financial crisis. Needless to say they were crushed. They finally managed a successful IPO in February 2012 at $9 but shares eventually sank to $4.50. After several quarters of mediocre earnings the company has finally gotten its act together and shares have rallied to $24 and appear to be gaining speed. The market cap at $3 billion is only a fraction of what their portfolio of hotels and casinos are worth. They still have a lot of debt and that is what held them back for years.
This is a play on their new momentum. The October $25 call is 75 cent OTM and bid at $1.95. I believe this is a decent opportunity we should take. If called we make $2.70 on a $24 stock.
Buy Write CZR Oct $25 Call, currently $24.25/$1.95, No stop
New Aggressive Recommendations
New Long Term Recommendations
Existing Play Recommendations
Links to original play recommendation
PHM - Pulte Homes (Covered Call)
PHM - Pulte Homes (CC Update)
BZH - Beazer Homes (Covered Call)
JASO - JA Solar (Covered Call)
LGF - Lions Gate Films (Covered Call)
LGF - Lions Gate (CC Update)
BBRY - BlackBerry (Covered Call)
CSIQ - Canadian Solar (Covered Call)
JASO - JA Solar (Covered Call)
QIHU - Qihoo (Short Put)
GMCR - Green Mountain Coffee (Covered Call)
TSLA - Tesla Motors (Covered Call)
JCP - JC Penny (Short Put)
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.