The market is off to the best start since 2006. Let's hope it continues.

The opening sprint out of the gate for 2018 has already put the major indexes into overbought conditions. From past experience we know this can last far longer than investors expect and those conditions can correct without any warning.

Fortunately, the Q4 earnings cycle starts on Friday and investors want to be fully invested as companies raise their guidance for 2018. Earnings estimates are expected to rise by 12% to 15%. Much of those expectations have already been priced into the market but there are probably some upside surprises ahead. We will have to start worrying around the second week of February once the majority of S&P companies have reported. That is when investors will begin to think about taking profits.

The S&P is well above its regression channel and it is guaranteed to retest the bottom of the channel and eventually move below that support. It has been two years since the S&P has declined 10% and it normally does it at least once a year. Once the guidance has been factored into the market, we could see weakness appear.

The index has stalled at 2,750, which was the high target by the aggressive analysts in 2017. Whether that is keeping a lid on current gains is unknown. With recent analysts revisions for 3100-3150 by the end of 2018, there should be plenty of gas in the tanks. However, Goldman Sachs is only forecasting 2,850 or roughly 3.5% higher than today's close. Nobody has a lock on being right and everyone has a different number.

The current support should be in the 2,700 range followed by 2,675.


The Dow fell -128 points at the open but recovered all but 16. That was a very bullish performance. The market had a perfect opportunity to equalize some of the overbought pressures but investors raced to buy the dip. The index is holding steady against its upper resistance channel and not giving up any ground.


The Nasdaq fell -55 points at the open but rebounded to recover all but 10 points. This was a significant bounce. Seven of the top 15 big cap stocks closed positive with the chip sector holding the index back. Broadcom (AVGO) was the biggest loser at -$6.

The tech sector has been cycling from positive to negative about every 3 weeks for the last six months. This could be a longer cycle because of the earnings expectations but we will eventually retest that uptrend support.


The low VIX and the bullish trend has further deflated premiums. Add in the start of Q4 earnings next week and the pickings are slim for plays with premium and a distant earnings date. This happens to us every quarter and we just have to deal with it. As companies begin reporting, the potential candidates will increase.

Enter passively, exit aggressively!

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.

Lines in blue were previously closed.

Current positions

Covered Calls



Current Position Changes


NFLX - Netflix (Jan Put Spread)

We had two january put spreads on Netflix and both were closed last Thursday.

Closed Jan $160 short put, entry $1.90, exit .12, +1.78 gain.
Closed Jan $145 long put, entry .40, exit .05, -.35 loss.
Net gain $1.43.

Closed Jan $165 short put, entry $2.05, exit .10, +1.85 gain.
Closed Jan $150 long put, entry .85, exit .06, -.80 loss.
Net gain $1.05.



FB - Facebook (Jan Put Spread)

We closed the short put on the Facebook spread at the open on Thursday. This was the second short put on this Facebook spread after the first one was stopped for a big loss. The second one was closed for a gain and made the overall position less painful.

Closed Jan $165 short put, entry $1.77, exit .18, +1.59 gain.
Previously closed Jan $165 short put, entry $2.18, exit $3.80, -1.62 loss.
Retain Jan $155 long put, entry .89, it will expire, -.89 loss.
Net loss 92 cents.



LRCX - Lam Research (Jan Put Spread)

The January put spread was closed at the open on Thursday.

Closed Jan $165 short put, entry $2.05, exit .13, +1.92 gain.
Closed Jan $155 long put, entry $1.04, exit .24, -.80 loss.
Net gain $1.12.



FIZZ - National Beverge (Feb Put Spread)

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)

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.



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.



New Recommendations


NVDA - Nvidia (Feb Put Spread )

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.



AAP - Advance Auto Parts (Feb Short Put)

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.



New Covered Call Recommendations


MARK - Remark Holdings

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.



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.

February expiration is the 16th.




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.


AAPL - Apple Inc (Jan Put Spread 11/22)

Apple shares have caught fire again with a $5 gain over the last two days. The stock is back near its highs and the holiday shopping season is going to be huge for iPhones.

Earnings Fed 3rd.

Sell short Jan $165 put, currently $1.56, initial stop loss $169.45.
Buy long Jan $155, currently .54, no stop loss.
Net credit $1.02.

Update 11/29/17:

AAPL - Apple Inc (Jan Put Spread)

Apple shares declined for the last three days with a big $3.50 drop today. We were stopped out on the short put for a big loss.

Closed Jan $165 short put, entry $1.31, exit $2.70, -1.39 loss.
CLOSE Jan $155 long put, entry .64, currently 1.08, est gain .44.
Estimated net loss 95 cents.


ACIA - Acacia Communications (Jan Put Spread 12/6)

Acacia shares have been moving up despite the weak Nasdag. Wednesday's close was a five week high. This is a low dollar position but the risk should be minimal.

Earnings Feb 3rd.

Sell short Jan $35 put, currently .70, initial stop loss $37.75.
Buy long Jan $30 put, currently .20, no stop loss.
Net credit 50 cents.

Update 12/27: The short side on the ACIA put spread was stopped out at $37.75 on Dec 21st. The position began to deteriorate on the 12th and was stopped last week.

Closed Jan $35 short put, entry .78, exit .75, +.03 gain.
Retain Jan $30 long put, entry .28, currently .15, no stop loss.


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.


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.


ADSK - Autodesk (Jan Put Spread 11/22)

Shares of Autodesk have taken off after their earnings. Shares closed at a new high on Wednesday. Premiums are high and we can sell well out of the money on this one.

Earnings Feb 13th.

Sell short Jan $115 put, currently $2.11, initial stop loss $122.50.
Buy long Jan $100 put, currently .94, no stop loss.
Net credit $1.17.

Update 11/29/17: The earnings site I used for Autodesk earnings was incorrect. The earnings were after the close on Tuesday. I recommended on Monday evening that we exit the position at the open on Tuesday.

Closed Jan $115 short put, entry $2.00, exit $2.03, -.03 loss.
Closed Jan $100 long put, entry .75, exit .55, -.20 loss.
Net loss 23 cents.


ALB - Albemarle Corp (Jan Call Spread 12/6)

ALB has declined for the last week after topping out just over $140 for two months. If the tax bill carries forward the negative items weighing on the market over the last couple days, we could see additional selling in stocks with big gains for the year.

Earnings Feb 3rd.

Sell short Jan $140 call, currently 75 cents, initial stop loss $135.65.
Buy long Jan $150 call, currently 25 cents, no stop loss.
Net credit 50 cents.

Update 1/3/18: The short side of the call spread was stopped when ALB rebounded with the market on Tuesday.

Closed Jan $140 short call, entry .85, exit .20, +.65 gain. Retain Jan $150 long call, entry .25, no stop loss.


BITA - Bitauto Holdings (Jan Covered Call 12/13)

BITA had a rough month with a decline from $53 to $28. Support at $28.50 has held for two weeks and Wednesday's close was a two-week high. I believe the worst is over. This call is $1 ITM so we will have a little insurance in the position.

Earnings Feb 13th.

Buy-Write Jan $30 call, currently $30.96-$2.80, stop loss $27.65.


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.


FB - Facebook (Jan Put Spread 11/29)

Facebook has had very good relative strength until today. I believe it was just caught up in the tech downdraft and will rebound early once the selling is over. I am willing to try a put spread well out of the money because there is strong support at $170.

Earnings Jan 31st.

Sell short Jan $165 put, currently $2.36, initial stop loss $169.50.
Buy long Jan $155 put, currently .99, no initial stop loss.
Net debit $1.37.

Update 12/6/17: Over the last week the Nasdaq has collapsed with the FANG stocks leading the decline. When I recommended the FB put spread last week the stock had dropped $7 to $175 and support. That was the first rotation day for the Nasdaq. The second rotation day was this week and we were stopped out at $169.50 at the open on Tuesday. Shares have already rebounded to $176.

When the market decides to take profits it can be immediate and painful. I am going to try the short put again since we already have a long put.

Closed Jan $165 short put, entry $2.18, exit $3.80, -1.62 loss.
Retain Jan $155 long put, entry .89, currently .64.

Sell short Jan $165 put, currently $1.77, initial stop loss $170.65.


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.


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.


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 (Jan Short Put 12/6)

The chip sector has been hammered over the last eight days but the selling should be about over. The $SOX rose slightly on Wednesday and LRCX has found prior support at $181.

Earnings Jan 16th.

Sell short Jan $165 put, currently $2.40, initial stop loss $174.85.
Buy long Jan $155 put, currently $1.40, no stop loss.
Net credit $1.00.


NFLX - Netflix (Jan Short Put 11/22)

Netflix is the gift that keeps on giving. Its high premiums and bullish bias keep giving us plays every week.

Earnings Jan 17th.

Sell short Jan $175 put, currently $2.74, initial stop loss $185.

Update 11/19/17:

NFLX - Netflix (Jan Short Put)

Netflix was caught in the Nasdaq crash with an $11 decline to stop us out for a big loss.

Closed Jan $175 short put, entry $2.51, exit $6.00, -3.49 loss.


NFLX - Netflix (Jan Put Spread 11/29)

If at first you don't succeed, try, try again. We were stopped on two Netflix positions on Wednesday but the $15 intraday drop was severely overdone. With any kind of positive market we should see Netflix rebound back over the $190 level, which was prior support.

Earnings Jan 17th.

Sell short Jan $160 put, currently $2.08, initial stop loss $174.50.
Buy long Jan $145 put, currently $1.02, no initial stop loss.
Net credit $1.06.


NFLX - Netflix (Jan Put Spread 12/13)

Netflix option premiums are the gift that keeps on giving. They have value well away from the stock price. Netflix shares have found support at the 100-day average and once the tax bill has passed, we could see the tech sector rebound. This put spread is $22 OTM.

Earnings Jan 17th.

Sell Jan $165 put, currently $2.11, initial stop loss $178.35.
Buy long Jan $150 put, currently 96 cents, no stop loss.
Net credit $1.15.


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.


OSTK - Overstock.com (Jan Put Spread 12/13)

This is kind of a strange play. Overstock was/is an online retailer of excess inventory that belongs to other people. It has had a checkered past. However, CEO Patrick Byrne has come up with an idea to use blockchain to determine property and territory rights. Overstock is forming a new company called De Soto Inc that will begin to formalize property ownership by using multiple methods to establish the chain of succession in property where none currently exists. Globally about 80% of the world's population is unable to sell or commercialize their property because of a lack of standardized property records. There is roughly $14 trillion in "dead" property because of a lack of property ownership records. Overstock is going to launch its first pilot program in early 2018 after forming partnerships with economist Herando de Soto and Medici Ventures. Byrne has been a "colorful" character in the past but he may have hit on something that will make him a huge success. The stock is up 213% YTD but now that he has attached the keyword "blockchain" to its future it could go higher.

Earnings Feb 7th.

Sell short Jan $40 put, currently $1.20, stop loss $49.85.
Buy long Jan $30 put, currently 40 cents, no stop loss.
Net credit 80 cents.

Update 12/27: Overstock went into decline on the 20th and gapped down on the 22nd to stop us out of the position. It was looking very good prior to the peak.

Closed Jan $40 short put, entry $1.20, exit .60, +.60 gain.
Retain Jan $30 long put, entry .39, exit .05, no stop loss.


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.


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.


SHOP - Shopify (Jan Put Spread 11/22)

Shares closed at a 2-month high on Wednesday after a $12 gain over the last five days. Shares appear to be headed for a retest of the prior high just over $120.

Earnings Jan 31st.

Sell short Jan $95 put, currently $1.85, initial stop loss $101.50.
Buy long Jan $80 put, currently .55, no stop loss.
Net credit $1.30.

Update 11/29/17:

SHOP - Shopify (Jan Put Spread)

Shopify was caught in the Nasdaq decline with a -$12 intraday drop to stop us out of the short side.

Closed Jan $95 short put, entry $1.82, exit $3.90, -2.08 loss.
CLOSE Jan $80 long put, entry .45, currently .85, est gain .40.
Estimated net loss $1.68.


WLL - Whiting Petroleum (Jan Covered Call 12/21)

Crude prices are refusing to decline and various production outages around the world are helping to reduce inventories. We still have the rough patch between Jan-Apr but the outlook is improving. Whiting appears to have found support at $22.50 after some rocky months.

Expected earnings Jan 24th.

Buy-write Jan $24.50 call, currently $24.37-$1.41, stop loss $22.00.


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.


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.