We are heading into the Q2 earnings cycle and earnings warnings are increasing in frequency. S&P capital IQ said Q1 earnings growth was +3.4% and Q2 is now expected to be +7.1%. However, we always go into the cycle with hopeful expectations and it goes downhill from there.

This quarter we might actually see some decent earnings as a result of the snapback in activity from the severe weather in Q1. However, retailers have not been excited about the sales and numerous stores have already warned. That suggests the snapback rubber band may have lost its rebound potential.

The current list of plays may be the last ones before the flood of earnings reports make it increasingly hard to find candidates. We do not want to hold over an earnings report if we can help it. The potential for disaster is too high.

The earnings calendar knocked out about 90% of the potential plays for this week. Most companies have earnings in late July. July options have already evaporated and August options don't work.

While nobody knows for sure and quite a few people are expecting a summer decline I would caution you not to overextend your personal portfolio. Take smaller positions and only those you feel comfortable holding through some market volatility.

I either raised or added stop losses to almost all the positions to avoid being knocked for losses if a low volume summer decline suddenly appears.

Jim Brown

Send Jim an email

Current Portfolio

Current positions

Covered Calls

Long Term Positions

Past performance

Click for 2014 Statistics through February

Click for 2013 Statistics

Current Position Changes

Earnings Dates

Here are the earnings dates for our current positions. We need to be out of the positions before the earnings. That is not applicable for the long term positions or stock held for future call writing. Covered call positions will be evaluated the week before the expiration. Most of our current calls expire in July and will not be a problem. Some don't.

AAL - 7/17
IOC - 8/13
ISIS - 8/05
FEYE - 8/05
GTAT - 8/06
YNDX - 7/24
ITMN - 7/31
CLVS - 8/07
ARWR - 8/07
GOGO - 8/07

EXAS - Exact Sciences (Closed)

The July $11 put on EXAS had declined to only 15 cents and did not justify the continued risk in keeping the play open for another month. I recommended last week we close this position. You could sell a higher strike but you have to reach out to October to get any decent premium.

Closed July $11 Put, entry .70, exit .15, +.55 gain.

ARWR - Arrowhead Research (Called)

ARWR rallied from our entry point of $10.97 to close at $15.05 on Friday and out June $11 call was called away.

Closed ARWR Jun $15 Call, entry $10.97-1.75, exit $11-1.75
Net gain $1.78

YELP - Yelp Inc (Close)

The July $57.50 put we sold for $2.40 has declined to 15 cents and there is no further reason to keep this position open. We have nothing to gain and a lot to lose if an unexpected event were to occur.

Close YELP July $57.50 Put, entry $2.40, currently .15, +2.25 gain.

GBX - Greenbrier (Close)

Our Greenbrier July $50 put we sold for $1.25 has declined to 30 cents. GBX shares have declined for three days. Rather than hold the position to gain another 10-15 cents I am recommending we close it to reduce our risk. GBX is currently at $59 and we have a $50 put so there is little chance of a $9 drop but stranger things have happened.

Close GBX July $50 Put, entry $1.25, currently .30, +.95 gain.

MOBI - Sky-Mobi Ltd (Update)

MOBI was stuck in a sideways motion above $6 and can't seem to maintain any upward momentum. However, shares suddenly spiked to $8.50 last week and I wanted to take advantage of this spike to sell a new call. We would have to go out to October (116 days) to get any premium. After reading the news I decided not to sell a new call at this time. Somebody bought 3,000 July $10 calls on Friday. That was four times the prior open interest. I don't want to write a $10 October call only to have some buyout announced next week. Continue to hold the stock and we will see how it plays out.

CLVS - Clovis Oncology (Close )

The bounce in Clovis is fading. We have a short July $45 put we launched two weeks ago and it is currently at breakeven with the stock declining. I am recommending we close this position and put our money to work elsewhere.

Close CLVS July $45 put, entry $5.60, currently $5.40, +.20 gain.

CLVS - Clovis Oncology (Long Term Update )

I recommended we close the short term position but I want to keep the long term repair position open. We have an October put/call combination in an attempt to recover the losses from the Clovis crash in early June. I did raise the stop on the short put in that position just in case. We don't need to be put some extra Clovis shares.

FB - Facebook (Closed June Put)

We had a short and long term position in Facebook and the short term June put was due to expire in the money on Friday. We wrote these when FB was moving towards $75 and analysts were predicting $100 by year end. Unfrotunately there were several potholes in that road that delayed the upward momentum.

Recently shares have moved over resistance at $64 and I expect a further gain into earnings, which are expected to be strong.

Closed June $80 Put, enrty $12.95, exit $15.40, -2.45 loss.

New Short Put Recommendations

AMBA - Ambarella Inc

Ambarella makes the video compression chips used in the GoPro and DropCam cameras. GoPro is launching its IPO this week and Google just said it was buying DropCam for $550 million. Both of those companies will now be flush with cash and Ambarella is in the sweet spot.

With earnings in September I am recommending an August option slightly in the money to allow for stock appreciation.

Earnings 9/2/14

Sell short AMBA Aug $33 Put, currently $3.80, no initial stop

New Covered Call Recommendations

AMBA - Ambarella Inc

Ambarella makes the video compression chips used in the GoPro and DropCam cameras. GoPro is launching its IPO this week and Google just said it was buying DropCam for $550 million. Both of those companies will now be flush with cash and Ambarella is in the sweet spot.

With earnings in September I am recommending an August option slightly out of the money to allow for stock appreciation. If called we could make $3.60 on the position.

Earnings 9/2/14

Buy-write AMBA Aug $33 Call, currently $30.44-$1.05, no initial stop

NLNK - NewLink

NewLink Genetics has recovered from April/May consolidation pattern and closed above the $26 resistance today. They have earnings in early August so I am recommending a July call.

Earnings 8/5/14.

Buy-write July $28 call, currently $26.12-$1.45, no initial stop.
Gain if called $3.33

New Aggressive Recommendations

UBNT - Ubiquiti Networks

UBNT is taking over the wireless broadband community worldwide. They appear to have the best products at a fraction of the cost. Demand is so strong they have waiting lists for products.

With earnings in early August I am recommending a put slightly in the money to increase the premium. We will be out before earnings.

Earnings are 8/7/14.

Sell short July $48 put, currently $3.20, no initial stop.

New Long Term Recommendations


Existing Play Recommendations

Links to original play recommendation

CLVS - Clovis Oncology (Aggressive Covered Call)

FB - Facebook (Long Term Short Put)

MOBI - Sky-Mobi Ltd (Covered Call)

KNDI - Kandi Technology (Covered Call)

NUS - NuSkin (Aggressive Short Put)

PRAN - Prana Biotech (Short Put - Update)

APC - Anadarko (Long Term Short Put)

ARWR - Arrowhead Research (Covered Call)

EXAS - Exact Sciences (Short Put)

GTAT - GT Advanced (Covered Call)

YNDX - Yandex (Covered Call)

ISIS - Isis Pharma (Covered Call)

ISIS - Isis Pharma (Long Term Covered Call)

ITMN - Intermune (Covered Call)

FEYE - FireEye (Short Put)

YELP - Yelp Inc (Short Put)

GBX - Greenbrier (Short Put)
CLVS - Clovis Oncology (Update Existing Position)

CLVS - Clovis Oncology (New Call/Put)

ARWR - Arrowhead Research (Covered Call)

GOGO - GOGO Inc (Covered Call)

AAL - American Airlines (Short Put)

ISIS - Isis Pharma (Covered July Call)

IOC - Interoil (Aggressive Covered Call)

TAN - Solar ETF (Long Term Covered Call)

FEYE - FireEye (Long Term Covered Call)

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.