The indexes tried to move to new highs but only one was successful.
The Nasdaq was the only index that made a new high on Monday but it was not because the others did not try. The S&P was in new high territory all day but faded into the close.
The Dow and S&P both fell back below strong resistance after spending most of the day above that level. For the S&P it was a close back below 1848 and the Dow fell back to 16,200 at the close.
It was not a bad day despite the major reversal of the gains at the close. The Dow had been up nearly 200 all day but fell back to a +103 gain. I believe that was a win even though resistance still has a solid grip.
The big intraday gains sucked all the volatility out of the market and it was difficult finding some plays with any material premium. When the market is bullish the put premiums disappear and when the market rolled over to close -100 points off its highs the call premiums evaporated. Sometimes it seems like we can't win but there are always some plays if we look hard enough.
Send Jim an email
Long Term Positions
Current Position Changes
GALT - Galectin Therapeutics (Called)
We had a covered call on GALT using the February $12.50 call. The strike closed deep in the money and the position would have been called.
GALT stock, entry $11.75, exit $12.50, +.75
GALT Feb $12.50 call, entry $1.15, called, +1.15 gain
Net gain +$1.90
INCY - Incite Corp (Called)
We had a February covered call using the $50 strike that was obscenely in the money at expiration and the position would have been called away.
INCY shares, entry $51.16, exit $50, -$1.16 loss
INCY $50 Call, entry $4.50, called, +4.50 gain
Net gain +$3.34
HIMX - Himax Tech (Close)
We have a March $14 covered call on HIMX and the stock has lost momentum and could be on the verge of turning lower. I want to close this position and avoid a potential loss.
Buy to close Mar $14 call, entry $1.17, currently .65, +.52 gain
Sell HIMX shares, entry $14.22, currently $13.58, -.64 loss.
Previously closed Jan $15 call, entry .61, exit .07, +.54 gain
Net gain +.42 cents.
Raise stop to $142.75 on VRX
Raise stop to $65.45 on YY
Raise stop to $43.95 on XONE
Raise stop to $42.65 on TAN
New Short Put Recommendations
NUS - Nuskin
Nuskin crashed back to $69 after China said it was reviewing their business plan to see if they were a pyramid scheme. After a quick rebound they retested that support on Feb 7th and it has been all uphill since then. They preannounced earnings that were slightly better than expected and the stock got another boost. China appears to be leaning towards a restatement of the rules for direct selling. In China the Nuskin sales meetings sometimes drew hundreds or even a thousand people to the event. China is not used to having a lot of people congregate and they were worried there could be something subversive in those meetings. The restatement of the rules is expected to require a government monitor to attend every sales meeting to supposedly make sure all the selling rules are being met but in reality to make sure there is no antigovernment actions taking place.
The clarification of the potential rules and the unlikely potential for Nuskin to be kicked out of China has allowed the stock to rise sharply over the last two weeks. I believe the worst is over and the overall trend from here will be up.
$80 has turned into strong support.
Sell short NUS March $75 Put, currently $2.80, stop $79.45
Sell short NUS April $75 Put, currently $7.20, stop $79.45
FEYE - FireEye
Virus security company FireEye spiked from $40 to $75 since early January and then spent a month in a consolidation pattern at the $70 level. It appears the uptrend is about to continue with a series of higher lows and Monday's close was above the recent congestion. With Internet security a daily topic in the news headlines I believe the company is ready to move higher. Earnings are May 8th.
Sell short March $70 Put, currently $2.45, stop $70.50
New Covered Call Recommendations
AAL - American Airlines Group
American is taking off after their reorganization plan was approved. Shares rallied to $34 then consolidated there for a month. The last three days we have seen AAL breakout of that consolidation and set a new high.
Earnings are April 29th.
Buy-write AAL-Mar $37 Call, currently $36.66-$1.00, stop $33.95
TKMR - Tekmira Pharma
TKMR is on a rocket ride higher. They launched from $8 in January and have been riding the biotech express to the close at $21.63 today. Analysts are excited about TKMR and believe it can go higher. The company announced a shelf registration on Friday and the stock dipped -$3 but the dip was immediately bought. The premiums are high and will give us about a 10% cushion against profit taking.
No earnings date is listed probably because they have no earnings as a research company.
Buy-write TKMR Mar $22.50 Call, currently $21.63-$2.00, stop $17.95
NOW - ServiceNow Inc
NOW is a cloud-based services provider to automate enterprise IT operations in North America and Europe. The applications include project management, IT cost management, IT governance, risk and compliance and operational applications.
The stock has a steady uptrend and closed at a new high on Friday. Earnings are April 30th.
Buy-write NOW-Apr $70 Call, currently $68.90-$3.60, stop $64.85
INCY - Incite Corp
We just exited a successful covered call on INCY on Friday and the chart suggests the stock is about to start another leg higher after two months of consolidation. I am willing to play INCY again and see if we can grab a $7 profit.
Earnings are May 14th.
Buy-write INCY Apr $70 Call, currently $57.05-$4.10, stop $60.65
Gain if called $6.95
New Aggressive Recommendations
New Long Term Recommendations
FB - Facebook
Facebook is in the news every day and the acquisition of WhatsApp last week has insured they will continue to dominate their space. I believe FB shares are headed for triple digits. The steady $1 gain every day is devoid of volatility and every minor dip is immediately bought. I am going to recommend two strikes on this long term play. The first is the June $80 put that is only $9 in the money. The odds of FB moving over $80 by June are very close to 100%. The second strike for those who believe as I do that FB is going to triple digits is the January $100 strike. Open interest is nearly 1,000 so plenty of people believe as we do. The $105 strike has 1,141 open interest.
Don't play both strikes. Pick the one you want. The risk is exactly the same. The only difference is the time in the trade and the potential return.
Sell short FB June $80 Put, currently $12.90, no stop.
Sell short FB January $100 Put, currently $32.55, no stop.
Existing Play Recommendations
Links to original play recommendation
CZR - Caesar Ent (Covered Call #1)
CZR - Caesar Ent (Covered Call #2)
CZR - Caesar Ent (Covered Call #3)
TSLA - Tesla Motors (Long Term Short Put)
INCY - Incyte (Covered Call)
VNET - 21Vianet (Covered Call)
TAN - Solar ETF (Long Term Short Put)
CLVS - Clovis Oncology (Aggressive Covered Call)
ARWR - Arrowhead Research (Covered Call)
EXAS - Exact Science (Covered Call)
CLVS - Clovis Oncology (Aggressive Covered Call)
HIMX - Himax Tech (Covered Call #2)
BBRY - BlackBerry (Covered Call)
GILD - Gilead Sciences (Short Put, Cov Call)
PRAN - Prana Biotech (Covered Call)
GALT - Galectin Therapeutics (Covered Call)
QIHU - Qihoo 360 Technology (Covered Call)
VRX - Valeant Pharma (Short Put)
NLNK - Newlink Genetics (Short Put)
SINA - Sina Corp (Short Put)
VJET - Voxeljet (Short Put)
AEGR - Agerion Pharma (Short Put)
ARWR - Arrowhead Research (Covered Call)
YUM - YUM Brands (Aggressive Short Put)
ILMN - Illumina (Aggressive Short Put)
YY - YY Inc (Short Put)
XONE - Exone (Short Put)
QIWI - QIWI Plc (Covered Call)
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.