The combination of Greece, the Federal Reserve and quadruple witching expiration could make this a rocky week for the markets. We need to pick our entries carefully and keep the positions small.

Greek headlines knocked the market for a -200 point drop at the open on Monday but dip buyers showed up early to erase half the damage. However, futures are down hard again on Monday night and we could be headed for another negative day on Tuesday.

The Greek headlines are a gift that keeps on giving for the bears. It is not that whatever happens to Greece will impact our equity market but it is the constant uncertainty that will do the most damage.

Add in the FOMC meeting announcement and press conference on Wednesday and that is another headline that could move the market. The IMF and World Bank have asked the Fed not to raise rates in 2015 because of the already strong dollar but I think Janet Yellen has already made up her mind. She is likely to point to the September meeting as liftoff for rates in her press conference.

The quadruple option expiration always seems to cause trouble for the market and the week is already off to a bad start. The week after expiration is even worse with the Dow down an average of -1.1% for 22 of the last 25 June expirations.

I kept the new plays to a minimum but I did provide a list of potential candidates if you are looking for more trades.

Jim Brown

Send Jim an email

Current Portfolio

The fourth column in the portfolio graphic is the earnings date. We will always exit a position before that date unless specifically mentioned otherwise in the play description. For the plays where we will not exit I added the No-X designation in the portfolio.

Current positions

Covered Calls

Current Position Changes

GPRO - GoPro (Closed)

GoPro refused to decline but should the market weaken further the big gainers will eventually crash. I recommended we close the position to reduce our risk.

Closed June $47 put, entry .75, exit .08, +.67 gain.

PRLB - Proto labs (Stopped)

Shares of Proto spiked up on the 9th to stop us out at the lowered stop loss at $68.25. We exited with a nice profit despite the inflated premium on the spike. Retain long Jun $80 call just in case of an upside surprise.

Closed Jun $75 call, entry $1.17, exit .25, +.92 gain.
Retain June $80 call, entry .40, currently .00, -.40 loss.

OLED - Universal Display (Stopped)

Universal held at the highs for several weeks but the downrade of Micron today was too much and shares dipped to stop us out at $52.95. The gap down open erased the majority of our gains with only 4 days left until expiration.

Closed June $47 put, entry .65, exit .50, +.15 gain

New Recommendations

GPRO - GoPro (Short Put)

GoPro dipped for two days on the analyst downgrade but is fighting a negative market and making gains again. We just exited a profitable short put on GoPro and I am hoping lightning strikes twice here and we can do it again.

Earnings July 30th.

Sell short July $52.50 put, currently .90, initial stop loss $54.85

New Covered Call Recommendations

SRPT - Sarepta Therapeutics

This stock has been a great covered call for June. Now that the consolidation is over from the late May news on the New Drug Agreement (NDA) with the FDA, the stock is moving higher again. There is no news and with several drugs in the pipeline the company is a likely acquisition target.

Earnings August 6th.

Buy-write SRPT July $30 call, currently $28.60-$1.70
Gain if called $3.10

FEYE - FireEye

No market weakness here. The cyber security sector is on fire and FireEye is leading the charge higher. The news about the theft of 14 million government personnel files has increased the pressure on companies to protect their data. FireEye just signed a major deal with Visa to protect their network and others are likely to follow suit.

Earnings August 5th.

Buy-write FEYE July $55 call, currently $53.23-$1.80
Gain if called $3.57

Unofficial Suggestions

Too Good to Ignore

I did not use these plays today but they will make a good starting place if you are looking for something else to trade.

Bear Call Spreads

Symbol, Price, Strikes, Premium, Net Credit, Earnings Date.

Z - 86.31 - 95/105 - .90/.20 - .70 August 5th
FB - 80.71 - 85/90 - .61/.12 - .49 July 22nd
TAP - 71.40 - 75/80 - 1.10/.45 - .65 Aug 6th
DVN - 61.64 - 65/70 - .57/.10 - .47 August 4th
BABA - 86.11 - 92.5/97.5 - .70/.26 - .44 Aug 12th

Short Puts

Symbol, Price, Strike, Premium, Earnings Date

PRTA - $47.26 - $40.00 - .70 August 4th
KYTH - $59.72 - $50.00 - .70 August 6th
AMBA - $117.41 - $105.00 - $2.80 - Sept 3rd

Covered Call

Symbol, Price, Strike, Premium, Earnings Date

RDUS - $48.88 - $50.00 - $3.30 August 12th

New Aggressive Recommendations


New Long Term Recommendations


Existing Play Recommendations

Links to original play recommendation

BHI - Baker Hughes (Covered Call)

NOW - ServiceNow (Bear call Spread)

PRLB - Proto Labs (Bear call Spread)

GPRO - GoPro (Short Put)

OLED - Universal Display (Short Put)

SRPT - Sarepta Therapeutics (Covered Call)

RDUS - Radius Health (Covered Call)

AAL - American Airlines (Bear Call Spread)

HLF - Herbalife (Short Put)

NSC - Norfolk Southern (Bear call Spread)

Z - Zillow (Bear call Spread)

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.