We actually only lost two positions today in LL and NLNK but the market had a really bad day. The Nasdaq lost -52, Dow -107 and S&P -16. The futures are flat tonight so there is no indication of which way we are headed tomorrow.
The market is due for a pause. The small caps normally lead the market up and down and the small caps were the worst performers today and for the last week. This is troubling for future guidance.
Because of the market instability I only added three positions today. We lost 8 positions the prior week and four were closed this week. I really don't want to have a boatload of positions if the market really decides to correct for the first time in three years.
We are approaching the Q3 earnings cycle and I went through and updated all the earnings dates. We want to make sure we exit all the short term positions before the 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.
AVGO has rallied $12 since we added it back on August 18th. The Oct $72.50 put is now 20 cents and there is no reason to keep it open.
LL - Lumber Liquidators (stopped 9/22)
LL ended two months of gains to fall from $61 to $55 on Fri/Mon to stop us out at $55.75. The long recovery is apparently over.
Closed Oct $55 put, entry $1.80, exit $2.75, -.95 loss.
NLNK - Newlink Genetics (stopped 9/22)
Newlink dropped over the last three days after competitor Tekmira got the government blessing on their Ebola medicine. We were stopped out at $24.65 today.
Close NLNK shares, entry 28.24, exit 24.65, -3.68 loss.
Closed Oct $30 call, entry $4.40, exit $1.19, +3.21 gain.
Net loss 47 cents.
NBIX - Neurocrine Bio (stopped 9/16)
NBIX hit its low for the month at 15.31 on Sept 16th and that stopped us out by 4 cents at 15.35. Just to make sure it got us the stock dipped back to 15.32 today.
Closed NBIX shares, entry 16.54, exit 15.35, -1.19 loss.
Closed Oct $17 call, entry .95, exit .70, +.25 gain.
Net loss 96 cents.
New Short Put Recommendations
AMBA - Ambarella
Ambarella is a supplier for the new Apple iPhone 6 and shares shook off the Nasdaq weakness today to close near a new high. If the market were to improve I believe AMBA would be making new highs.
Earnings are December 6th so we can play a November put without any earnings worry.
Sell short Nov $36 Put, currently $1.70, stop loss $36.95
New Covered Call Recommendations
New Aggressive Recommendations
GPRO - GoPro
GoPro refuses to decline. The stock gained $1 today despite the tech wreck on the Nasdaq. We already have an October position but I am going to add a November position as well given its relative strength.
Earnings are Oct 30th after the close so we will exit the position no later than the 29th.
Sell short Nov $60 Put, currently $6.50, stop loss $62.75
MBLY - Mobileye
Mobileye broke downtrend resistance today to gain $1.71 for the day. The GM announcement of a "driver-assisted" Cadillac provided the uplift. Shares have support at $46 and good relative strength.
Earnings are Nov 6th so we need to exit this position by Nov 5th at the latest.
Sell short Nov $43 put, currently $2.45, stop loss $44.85
New Long Term Recommendations
Existing Play Recommendations
Links to original play recommendation
CLVS - Clovis Oncology (Aggressive Covered Call)
CLVS - Clovis Oncology (Update Existing Position)
CLVS - Clovis Oncology (Covered Jan Call)
FB - Facebook (Long Term Short Put)
PRAN - Prana Biotech (Short Put - Update)
SRPT - Sarepta Therapeutics (Covered Call)
ISIS - ISIS Pharma (Covered Call)
AVGO - Avago Technologies (Short Put)
NLNK - Newlink Genetics (Covered Call)
ASPS - Altisource Portfolio Soln (Short Put)
TKMR - Tekmira Pharma (Short Put)
TKMR - Tekmira Pharma (Covered Call)
NBIX - Neurocrine Biosciences (Covered Call)
ARWR - Arrowhead Research (Covered Call)
GPRO - GoPro (Aggressive Short Put)
LL - Lumber Liquidators (Short Put)
CLR - Continental Resources (Long Term Short Put)
LNG - Cheniere Energy (Long Term 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.