Thursday, February 22, 2018  2:09:50 AM

Unexpected Storm Clouds

by Jim Brown

Click here to email Jim Brown
Review prior updates here: 2014  2015  2016  2017  2018 
The market had a reversal of fortunes on Wednesday on worries over interest rates.

The initially cheered the FOMC minutes at 2:PM and the Dow spiked to a 302 point gain. About 20 minutes later analysts began to talk about the addition of the word "further" to the discussion about future policy tightening and the gain turned into a -166 point loss. The Fed turned more positive on economic growth but worried if the tax cuts could have added too much fuel to the economic fire.

Since this meeting was before the market correction the odds of more than 3 hikes this year are still relatively low. The market choked on the conflicting analyst views and the computer programs turned negative.

Nothing has changed for the market outlook or the outlook on rates. However, the sudden uncertainty on the Fed caused treasuries to sell off hard and the yield on the ten-year spiked to 2.943% over just a few minutes. This intensified the selling in equities.


The S&P has been struggling with resistance at 2,735 and the crash after the minutes knocked it back to 2,700 with strong support at 2,675. This should be a bounce point after the jittery nerves have calmed overnight.


The Dow fell back below 25,000 and is nearing strong support at 24,700. That should be the rebound point for the Dow because the market fundamentals have not changed.


The Nasdaq was positive most of the day until the post Fed crash. The index is still the strongest and remains well above light support at 7,200.


I still believe the worst is behind us and the S&P futures are well off their overnight lows of -13.50. The market may open lower but the near term support should hold. We needed this little pause to rebalance the overbought conditions that were beginning to become a problem. Now the cautious traders on the sidelines have something to buy.

The passage of the earnings cycle and the market decline gave us a lot more opportunities this week. Option premiums inflated somewhat but given the current volatility they are still low.

Enter passively, exit aggressively!

Jim Brown

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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.

Lines in blue were previously closed.

Current positions


February Position Recap


We squeezed out another gain in February but the March cycle is going to be tough. We have had several big losses in the current month and we were fortunate to have some moves go in our favor in February. Volatility appeared as the calendar changed from January to February but we had already exited a lot of February positions or were profitable with high stops.




Current Position Changes


No Changes


New Recommendations


PXD - Pioneer Natural Resources (Apr Call Spread)

We already have a put spread on PXD but this well OTM call spread appeared and March is normally a seasonally weak period for oil prices.

Earnings May 8th.

Sell short April $195 call, currently $1.65, stop loss $183.75.
Buy long April $210 call, currently 55 cents, no stop loss.
Net credit $1.10.



URI - United Rentals (April Call Spread, Short Put)

United fell $25 in the market crash and has a long way to go to recover the old highs and this spread is well out of the money. The stock is also strong enough to avoid new lows unless the bottom falls out of the market.

Earnings April 26th.

Sell short April $195 call, currently $2.25, stop loss $181.
Buy long April $210 call, currently 85 cents, no stop loss.
Net credit $1.40.

Sell short April $145 put, currently $2.00, stop loss $158.50.



SWKS - Skyworks Solutions (April Short Put)

Skyworks put in a solid bottom at $95 over the last two months and despite the market weakness the stock has been moving higher. Even the recent rumors over Apple cutting Q1 orders for the iPhone X had no impact.

Earnings May 7th.

Sell short April $95 put, currently $1.15, stop loss $102.



WDC - Western Digital (April Short Put)

Western fell sharply in the market crash to support at $78 and then rebounded back over $85. The outlook is good for WDC despite the fight over the Toshiba memory. They came out of that battle with a win, just not the one they wanted.

Earnings April 25th.

Sell short Apr $75 put, currently $1.09, stop loss $81.25.



New Covered Call Recommendations


No New Covered Calls

Increased market volatility and the current earnings cycle makes covered calls dangerous at this time.


Other Potential Plays (Spreads, Covered Calls, Naked Puts)


These are not official plays but a good place to start if you are looking for something else to trade.

March expiration is the 16th. April expiration is the 20th.

Earnings dates are never guaranteed. Sometimes the dates change 2-3 times depending on various factors. In most cases the dates are provided by a third party like Zacks and they are using predictions based on the prior earnings. If a company reports on Wednesday Jan 24th then they expect them to report on a Wednesday around the 24th in April. The majority of the time they are close and once we move nearer to April, the company will announce when they are going to report and the calendar is updated. If you are in a position, you should always check at least weekly to see if an earnings date has been posted.




Existing Positions (Alpha by Symbol)

THESE ARE NOT CURRENT RECOMMENDATIONS. These are prior recommendations that are still active in the portfolio. Do NOT act on the plays described in this section. This is the archive of prior recommendations in the current portfolio.


AAOI - Applied Optoelectronics (Jan Short Put)

This stock behaved very well on Wednesday and actually posted a gain of 62 cents when the tech world was crashing. With this kind of relative strength it should do well in a positive market.

Earnings Feb 8th.

Sell short Jan $35 put, currently $1.60, initial stop loss $39.50.

Update 12/13: Last week I recommended closing the short put at the open on Thursday. Unfortunately, AAOI gapped down on Thursday and the option exploded higher to put us into a loss for the position. Sometimes if it were not for bad luck, we would have no luck at all.

Closed Jan $35 short put, entry $1.60, exit $2.13, -.53 loss.


AAP - Advance Auto Parts (Feb Short Put 1/10)

Shares rocketed higher in 2018 and have stalled in the $110 range. There were multiple articles on why auto parts manufacturers will thrive in 2018. Comparisons to Q1-2017 will be easy and earnings should rise. Full employment will fuel the auto market. Credit Suisse said AAP had the most potential for upside in 2018 when compared to ORLY and AZO.

Earnings Feb 13th.

Sell short Feb $100 put, currently $1.15, stop loss $107.85.

Update 1/31:

AAP - Advance Auto Parts (Feb Short Put)

AAP decline with the market to stop us out.

Closed Feb $100 short put, entry $1.50, exit .70, +$.80 gain.


ADBE - Adobe Systems (Feb Put Spread 1/3)

Adobe shares were recovering from the December weakness before the January bounce. They are now approaching their November highs.

Earnings March 15th.

Sell short Feb $170 put, currently $1.86, stop loss $175.00
Buy long Feb $160 put, currently .78, no stop loss.
Net credit $1.08.

Update 1/24: We closed both sides of the Adobe position at the open on Thursday.

Closed Feb $170 short put, entry $1.64, exit .47, +$1.17 gain.
Closed Feb $160 short put, entry .60, exit .33, -.27 loss.
Net gain 90 cents.


ADBE - Adobe Systems (Feb Short Put 1/3)

Adobe shares were recovering from the December weakness before the January bounce. They are now approaching their November highs.

Earnings March 15th.

Sell short Feb $170 put, currently $1.86, stop loss $175.


COST - Costco (Feb Put Spread 1/3)

Costco dropped from the earnings spike to find support at $185. Shares are rebounding strongly and that support give us a perfect stop loss point.

Earnings March 15th.

Sell short Feb $180 put, currently $1.30, stop loss $185.
Buy long $170 put, currently .55, no stop loss.
Net credit .75 cents.

Update 1/10/18:

COST - Costco (Feb Put Spread)

Costco fell through support when the market opened sharply lower on Wednesday on China fears. We were stopped out of the Feb short put. I considered reselling the short put but with support broken and retailing season over, I was concerned COST could continue lower. Our long put is too far out of the money to have a decent chance of rising in value. I am recommending we close it while it still has value.

Closed Feb $180 short put, entry $1.08, exit $2.00, -.92 loss.
Close Feb $170 long put, entry .57, currently .57.


COST - Costco (Mar Put Spread 2/14)

Shares dipped to $176 twice over four days and have rebounded to close over $187 on Wednesday. The retail sector is rebounding after a weak first half of February. Costco is Amazon proof and the best performer of the brick and mortar retailers.

Earnings March 15th.

Sell short Mar $175 put, currently $1.38, stop loss $182.00
Buy long Mar $165 put, currently .72, no stop loss.
Net credit 66 cents.


CP - Canadian Pacific (Mar Put Spread 1/24)

Shares have seen some significant volatility over the last two weeks but surged to close at a ne whigh on Wednesday. Cowen reiterated an outperform last week with a price target of $207. They reported earnings on the 18th that beat the street and announced several programs to increase rail traffic including strategic opportunities to increase crude by rail.

Expected earnings April 19th.

Sell short Mar $175 put, currently $1.95, stop loss $181.35.
Buy long Mar $160 put, currently .60, no stop loss.
Net credit $1.35.

Update 2/7:

CP - Canadian Pacific (Mar Put Spread)

Shares collapsed with the market since they had been in rally mode for six months. Investors ran to the exits. We were stopped on the short put for a minor loss and I am recommending we close the long put for a decent gain.

Closed Mar $175 short put, entry $1.55, exit $1.95, -.40 loss.
Close Mar $160 long put, entry .46, currently $2.00, est gain $1.54.

Update 2/14: Shares collapsed with the market since they had been in rally mode for six months. Investors ran to the exits. We were stopped on the short put for a minor loss and I recommended we close the long put for a decent gain.


Closed Mar $160 long put, entry .46, exit $1.73, +1.27 gain.
Previously Closed Mar $175 short put, entry $1.55, exit $1.95, -.40 loss.
Net gain $0.87.


DPZ - Dominos Pizza (Mar Short Put 1/31)

Dominos is soaring. The stock has rallied $50 since November. The $190 put is $26 OTM and still has a good premium.

Expected earnings Feb 27th. We will be out before earnings.

sell short Mar $190 put, currently $2.00, stop loss $206.50.

Update 2/7:

DPZ - Dominos Pizza (Mar Short Put)

Dominos crashed with the market to stop us out of the position. The stop came on Tuesday when the market gapped down -600 points at the open. That means our fill on the exit was at the highest premium for the day.

Closed Mar $190 short put, entry $2.15, exit $5.20, -3.05 loss.


FB - Facebook (Mar Put Spread 2/7)

Facebook closed at a new high just before the market weakness began. Shares have solid support at the 100-day average at $178 and they should outperform the market. Today was an exception because of a election advertising question out of Seattle.

Earnings April 24th.

Sell short Mar $165 call, currently $1.88, stop loss $175.
Buy long Mar $150 put, currently $.65, no stop loss. Net credit $1.10.

Update 2/14: Facebook ran into a bad news cycle where every day some lawmaker, agency or country was coming down on them about privacy issues, election related issues or simple downgrades. Shares crashed through the 100-day to stop us out of the short put for a loss. I am recommending we reenter the put now that the market is recovering.

Closed Mar $165 short put, entry $1.91, exit $3.05, -1.14 loss.
Retain Mar $150 long put, entry .56, currently .29.

Sell short Mar $165 pus, currently $1.25, stop loss $171.85.


FIZZ - National Beverage Corp (Feb Put Spread 12/21)

FIZZ reported earnings on Dec 6th and shares posted a decent gain. The very next day shares dropped -$13 on no news. In retrospect analysts were not impressed with the earnings growth. Since that drop shares have been rebounding steadily.

Expected earnings March 8th.

Sell short Feb $95 put, currently $2.15, stop loss $99.85.
Buy long Feb $85 put, currently $1.00, no stop loss.
Net credit $1.15.

Update 12/27: Uptrend support broke on Friday and we were stopped on the gap lower open on Tuesday. If the 200-day average at $100 fails our long put could come into play.

Closed Feb $95 short put, entry $2.35, exit $3.70, -1.35 loss.
Retain Feb $85 long put, entry .93, currently $1.20, no stop loss.

Update 1/10/18: We were stopped out of the short side the prior week and the long side was stopped on Monday.

Closed Feb $85 long put, entry .93, exit .70, -.23 loss.
Previously closed Feb $95 short put, entry $2.35, exit $3.70, -1.35 loss.
Net loss -1.58.


JACK - Jack in the Box (Feb Call Spread 12/27)

JACK spiked with earnings but has been fading ever since. The food borne illnesses at Chipotle has been weighing on Qdoba, which is owned by JACK. Shares are on the verge of closing at a three month low.

Earnings Feb 13th.

Sell short Feb $105 call, currently $1.75, stop loss $103.00
Buy long Feb $115 call, currently .45, no stop loss.
Net credit $1.30.

Update 1/10/18: We were stopped out of the short side of the spread when Jack suddenly spiked on Jan 5th to $102.50. The downward trend is continuing but the volatility knocked us out. I considered reselling the call but the premiums have evaporated.

Closed Feb $105 call, entry $2.00, exit $1.40, +.60 gain.
Close Feb $115 call, entry .37, currently .13.


JUNO - Juno Therapeutics (Feb Short Put 12/27)

Juno is rebounding from the December lows with a nice steady move higher. There is solid support at $42.50. Earnings are January 31st so we will have to close the position before expiration.

Earnings Jan 31st.

Sell short Feb $40 put, currently $1.45, stop loss $44.00.


LRCX - Lam Research (Mar Put Spread 1/31)

LRCX has been respecting the 100-day average as support for a long time. It is currently on the average and also on horizontal support at $188.50. In theory it should bounce from here.

Expected earnings April 26th.

Sell short Mar $170 put, currently $2.10, stop loss $182.50.
Buy long Mar $160 put, currently $1.05, no stop loss.
Net credit $1.05.

Update 2/7: LRCX collapsed in the market crash to stop us out of the short put. However, the long put has increased significantly and shares are still declining. I added a stop loss to the long put.

Closed Mar $170 short put, entry $2.20, exit $2.84, -.64 loss.
Retain long Mar $160 put, entry $.90, currently $4.07.

Update 2/14: LRCX collapsed in the market crash to stop us out of the short put. However, the long put had increased significantly and shares were still declining. I added a stop loss to the long put at $180 and that stop was hit on the 14th.


Closed long Mar $160 put, entry $.90, exit $1.80, +.90 gain.
Previously Closed Mar $170 short put, entry $2.20, exit $2.84, -.64 loss.
Net gain 26 cents.


LRCX - Lam Research (Mar Put Spread 2/14)

Lam dipped with the market to stop us out of put spread the prior week. The rebound is strong and the market is getting stronger. I am willing to try it again.

Earnings April 26th.

Sell short Mar $160 put, currently $1.60, stop loss $169.45.
Buy long Mar $150 put, currently $1.00, no stop loss.
Net credit 60 cents.


MU - Micron (Covered Call 1/17)

Micron has been volatile over the last several weeks with a sideways pattern. On Wednesday, shares found some traction and moved higher. Support at $41.50 has held for 6-weeks.

Earnings March 2nd.

Buy-write Feb $44 call, currently $44.26-$2.42, stop loss $41.85

Update 1/24: Micron never regained momentum and moved sideways for the week but the sharp drop at the open on Monday stopped us out.

Closed MU shares, entry $44.21, exit $41.85, -$2.36 loss.
Closed Feb $44 short call, entry $2.34, exit $1.03, +$1.31 gain.
Net loss 1.05.


MARK - Remark Holdings (Covered Call 1/10)

Remark is a technology company focused on development and deployment of artificial intelligence (AI) solutions. They have recently partnered with Alibaba, Sina, Weibo, Acxiom and others. The stock is exploding higher.

Earnings Feb 12th.

Buy-write Feb $15 call, currently $14.17-$1.60, stop loss $11.85.

Update 1/24: Remark lost its momentum after the second peak on the 18th and it has been a slow decline.

Closed MARK shares, entry $13.82, exit $12.15, -1.67 loss.
Closed Feb $15 short call, entry $2.00, exit .65, +$1.35 gain.
Net loss 32 cents.


NFLX - Netflix (Apr Short Put)

Netflix has blasted off on a SpaceX rocket to new highs in the $280 range. The market dip knocked it back to $250 and buyers flooded into the stock. I am going to reach out to April on this put so I can sell $50 OTM. As we pass February expirations the premium should take the first hit. That is also when the markets should begin to trend higher and Netflix will lead on the Nasdaq.

Earnings April 23rd.

Sell April $210 put, currently $3.10, stop loss $235.


NVDA - Nvidia (Feb Put Spread 12/21)

Nvidia rolled over with the semiconductor sector when the nasdaq sector rotation hit in late November. Shares dipped to the 100-day then rebounded. The second big cap tech dip in early December knocked the stock back to the 100-day once again and it bounced again. That level has been decent support. I am hoping the $37 drop from the highs has eliminated most of the sellers. The stock has more going for it today than it did a month ago after some recent product announcements.

Expected earnings Feb 13th.

Sell short Feb $170 put, currently $2.79, initial stop loss $183.65.
Buy long Feb $160 put, currently $1.59, no stop loss.
Net credit $1.20.

Update 1/24:

NVDA - Nvidia (Feb Put Spread)

We closed the short put at the open on Thursday.

Closed Feb $170 Short Put, entry $2.83, exit .29, +2.54 gain.
Retain Feb $160 Long Put, entry $1.44, currently .06. No stop loss.


NVDA - Nvidia (Feb Put Spread 1/10)

Nvidia impressed everyone at CES once again and shares are threatening to break throguh resistance at $224 and make a new high. We already have a NVDA put spread but nothing keeps us from adding another one.

Earnings Feb 13th. Must close before earnings.

Sell short Feb $190 put, currently 1.62, stop loss $208.65.
Buy long Feb $175 put, currently .61, no stop loss.
Net credit $1.01.

Update 2/14:

NVDA - Nvidia (Feb short put)

Nvidia shares crashed with the market to stop us out of the short put. I recommended we close the long put while it still had some value ahead of earnings.


Closed Feb $175 long put, entry .60, exit .25, -.35 loss.
Previously Closed Feb $190 short put, entry $1.64, exit .55, +$1.09 gain.
Net gain 74 cents.


PANW - Palo Alto Networks (Feb Call Spread 12/20)

Palo Alto reported good earnings back on Nov 20th and shares spiked to $152 then faded. The stock has been trading listlessly between $140-$150 for the last month. There is no upward momentum. I think getting through that $152 level over the next several weeks is going to be difficult in a potentially volatile market.

Expected earnings Feb 19th.

Sell short Feb $160 call, currently $1.57, initial stop loss $152.85.
Buy long Feb $170 call, currently .55, no stop loss.
Net credit $1.02.

Update 1/3/18: Shares rebounded with the market on Tuesday and stopped us out of the short call.

Closed Feb $160 short call, entry $1.68, exit $1.12, +.56 gain.
Retain Feb $170 long call, entry .60, currently .24, no stop loss.

Update 1/31/18: We were stopped out of the short side several weeks ago and we stopped out of the long call side last week.

Closed Feb $170 long call, entry .60, exit .45, -.15 loss.
Previously closed: Feb $160 short call, entry $1.68, exit $1.12, +.56 gain.
Net gain 41 cents.


PANW - Palo Alto Networks (Feb Put Spread 1/17 )

We tried a call spread recently but the stock recovered and began rebounding. It closed just pennies from a new high on Wednesday. I am going to try a put spread this time.

Earnings Feb 19th.

Sell short Feb $145 put, currently $1.54, stop loss $148.65.
Buy long Feb $135 put, currently .51, no stop loss.
Net credit $1.03.

Update 2/7:

PANW - Palo Alto Networks (Feb Put Spread)

We closed the left over long put at the open last Thursday.

Closed Feb $135 long put, entry .23, exit .12, -.11 loss.
Previously closed Feb $145 short put, entry $1.26, exit $1.05, +.21 gain.


PXD - Pioneer Natural Resources (Mar Short Put/Put Spread)

After falling 10% last week, oil prices are recovering. We are entering a seasonally weak period but inventories are declining. Energy equities fell with the market and oil last week and are rebounding this week. I am recommending either a short put or a put spread on PXD.

Earnings May 8th.

Short Put:

Sell short Mar $160 put, currently $1.00, stop loss $169.65.

Put Spread:

Sell short Mar $160 put, currently $1.00, stop loss $169.65.
Buy long Mar $150 put, currently .50, no stop loss.

Net credit 50 cents.


RH - RH Inc (Restoration Hardware) (Feb Short Put 1/3)

Shares found support at $85 and rebounded with the strong market. They are doing well selling into the hurricane recovery areas.

Earnings March 6th.

Sell short Feb $77.50 put, currently $2.15, stop loss $84.85.

Update 1/31: We had a tight stop on this position and we exited the play when the stock rolled over on Tuesday.

Closed Feb $77.50 short put, entry $2.25, exit .43, +$1.82 gain.


RHT - Red Hat Inc (Mar Short Put 1/24)

Red Hat shares have been moving slowly higher. They were up in a weak tech market on Wednesday and closed only about 35 cents from a new high.

Expected earnings March 20th.

Sell short Mar $120 put, currently $1.90, initial stop loss $124.65.

Update 2/7:

RHT - Red Hat Inc (Mar Short Put)

Shares collapsed with the market to stop us out. I am going to reload this using the $115 put.

Closed Mar $120 short put, entry $1.65, exit $1.85, -.20 loss.


RHT - Red Hat Inc (Mar Short Put 2/7)

We were stopped out of the $120 short put last week andI am going to reload it with the $115 put. RHT declineed but just enough to hit our stop. The stock has good relative strength and with a farther OTM put we can lower the stop loss.

Earnings March 26th.

Sell short Mar $115 put, currently $1.16, stop loss $122.25.


VMW - VMWare (Mar Short Put 1/24)

VMWare closed at a new high on Tuesday and only declined slightly in the Nasdaq sell off on Wednesday. They have a strong chart after coming back from the December dip.

Earnings March 1st. We must close before earnings.

Sell short Mar $125 put, currently $1.85, initial stop loss $133.50.

Update 1/31:

VMW - VMWare (Mar Short Put)

News broke that Dell was considering a reverse merger with VMW, where it already owns 80% of the stock, and the bottom fell out of the stock. We were stopped for a big loss on the big drop since the velocity was extreme from the $165 high the day before.

Closed Mar $125 short put, entry $1.85, exit $3.70, -1.85 loss.


WYNN - Wynn Resorts (Mar Short Put, Put Spread 1/31)

I am sure everyone has heard about the disaster that struck WYNN shares last week. Steve Wynn was accused of sexual harassment and the stock fell nearly $45 in a knee jerk reaction to the news. I believe the worst is over since the stock has already lost $4.5 billion in market cap. Wynn is old (76), blind and the board is likely to eject him from the business. He owns 11.8% of the outstanding shares and his net worth has already declined by $450 million over the last week. The best thing he could do would be to resign and let the stock rebound. I am sure the board will explain it to him.

Expected earnings April 23rd.

Sell short Mar $140 put, currently $1.82, stop loss $153.50.

You could also play this as a spread:

Sell short Mar $140 put, currently $1.82, stop loss $153.50.
Buy long Mar $125 put, currently .80, no stop loss.
Net credit $1.02.

Update 2/14: Easy come, easy go. Wynn shares spiked to $180 on the news Steve Wynn had resigned. Two days later Morgan Stanley downgraded the stock saying without Steve Wynn at the helm there could am impact to operations and growth as well as activist pressures. Lawsuits are springing up almost daily against the casino for allowing a sexual predator to run free. Shares crashed back to $160 to stop us out of both short put positions.

Closed 2/8: Mar $140 short put, entry $2.06, exit .91, +$1.15 gain.
Retain Mar $125 long put, entry .54, currently .21, no stop loss.

Closed 2/9: Mar $155 short put, entry $2.01, exit $5.60, -$3.59 loss.


WYNN - Wynn Resorts (Mar Short Put 2/7)

Steve Wynn resigned as CEO and Chairman because of the sexual harassment allegations that tanked the stock price. The rebound put the shares well over support at $160 and they should remain at this level or move higher.

Earnings April 23rd.

Sell short Mar $155 put, currently $2.07, stop loss $161.50.


YY - YY Inc (Feb Short Put 1/3)

YY has a steady chart with the last touch of the 50-day average back in July. The December dip has been erased and the stock is retesting the recent highs.

Earnings Feb 13th. We need to exit before expiration.

Sell short Feb $105 put, currently $2.15, stop loss $111.25.

Update 1/31: YY crashed with the market on Tuesday to stop us out. One position was profitable, the recently entered position was not.

Closed Feb $105 short put, entry $1.75, exit .15, +$1.60 gain.


YY - YY Inc (Feb Short Put 1/17)

YY is testing the recent highs and Wednesday's close was only 30 cents from a new high. Good steadyuptrend since the dip in late November.

Earnings Feb 13th.

Sell short Feb $120 put, currently $1.50, stop loss $124.85.

Update 1/31: YY crashed with the market on Tuesday to stop us out. One position was profitable, the recently entered position was not.

Closed Feb $120 short put, entry $1.47, exit $2.90, -1.43 loss.


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.