It was too good to last to have an entire week of gains and no major dip.
Monday was mixed with the Dow and S&P down slightly and the Nasdaq slightly positive. I credit that to month end retirement contributions being put to work by fund managers. We could see some more of that on Tuesday but the S&P futures are down sharply tonight by -4.50 so they could get another buying opportunity in the morning.
I believe we are going to close the year higher than we are today but it could be a rocky road. Conditions are improving but we are still dependent on overseas factors. The ECB meets on Thursday and will announce the progress of their various stimulus programs. Depending on Draghi's conviction the market could be disappointed.
This is also payroll week with the ADP Employment on Wednesday and the Nonfarm Payrolls on Friday. While those are not expected to disappoint we can never say never.
Lastly Tuesday is Election Day. The market has been in rally mode in part because the republicans are expected to gain control of the Senate and that will mean some forward progress on the more than 200 bills that have been blocked by Harry Reid from even coming to a vote in the Senate. As one commentator put it, "Harry Reid has been President Obama's veto pen." By not allowing votes on bills the president does not want to sign it prevents the president from having to veto the bills and give reasons why. For the last two years they have just been falling into the black hole beside Harry Reid's desk.
The market views a republican win as a positive for the economy. The futures could be down tonight because of the indecision in the various contested races. The TV channels are chock full of political reporting and speculation.
Lastly, since the market has already been pricing in a republican victory we could see a sell the news event.
I can't wait until all this hand wringing is over and the market can trade on earnings and the economy and not worry about all the potholes in the road ahead.
We are finally through the majority of the Q3 earnings cycle so we have a lot more candidates to sift through than last week. I did raise the stop losses again just to make sure we don't see our gains turn to losses.
Send Jim an email
Long Term Positions
Current Position Changes
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.
MU - Jan 6th
UAL - Jan 22nd
UPS - Jan 23rd
AMBA - Dec 5th
KPTI - Nov 5th
MSFT - Jan 26th
SNDK - Jan 15th
PRAN - UNK
KPTI - Karyopharm Therapeutics (Close)
KPTI is in rocket mode but they have earnings on Nov 5th so we need to close this position to avoid any unnecessary surprises.
Close short Nov $30 put, entry $1.05, currently $.40, +.65 gain
New Short Put Recommendations
UPS - United Parcel (Put spread)
UPS is in its prime season. The stock closed at a new high on Monday and appears poised to surge to new highs in the weeks ahead. The sharp drop in fuel prices is a help to profitability even though they do pass part of the savings on to customers. They are facing an 11% rise in package shipments for the holidays and they have announced a price increase for January. Everything is looking up for UPS.
I am recommending we sell an in the money put and buy an out of the money put. Our maximum risk is the spread between the two strikes minus the premium received.
Sell short Dec $110 put, currently $5.45, no stop.
Buy Dec $100 put, currently .72, no stop.
Net credit $4.73
GPRO - GoPro
GoPro blew away earnings and raised guidance and the stock is flying again. The beauty of GoPro is the huge premiums deep out of the money thanks to the volatility.
This is a November put with only 18 days until expiration.
Sell Nov $75 put, currently $2.60, stop loss $76.35.
KNDI - Kandi Technologies
Kandi is an electric car manufacturer in China. Their business is booming. They will make three times the number of cars Tesla is building this year. They just announced a 100,000 car share program where people can pay for a car by the day. The stock is rebounding strongly from the October support low and should continue to retest the old highs in the $20-$22 range.
I could not find an earnings date. They do have an analyst meeting scheduled for Nov 12th at 9:AM PT.
Sell short Dec $17.50 put, currently $2.55, stop loss $15.75
New Covered Call Recommendations
New Aggressive Recommendations
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)
MU - Micron (Put Spread)
AMBA - Ambarella (Put Spread)
KPTI - Karyopharm Therapeutics (Short Put)
MSFT - Microsoft (Put Spread)
BBRY - Blackberry (Call Spread)
SNDK - SanDisk (Short Put)
BBH - Biotech ETF (Short Put)
UAL - United Continental (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.