Updates, Thursday, 02/10/2005 09:31:38 PM ET
HAVING TROUBLE PRINTING?
In and out. The longer you stay in, the more trouble you can get into. That theory applies to many areas of life. It also applies to our approach for quickies -- the trading kind.
Ask And Ye Shall Receive
Has the market leveled off? Are we back in a range? Well, some CPTI students want to put it to the test -- on a short term basis. They've been clamoring for some quickies. Well, ask and ye shall receive. Just remember, these "hypothetical" quickie positions require your "not-so-hypothetical" attention. The prices below are based on Thursday's closing prices plus some bid/ask negotiation where applicable. As long as you get relatively close to the prices below, the trades are still worthwhile. If the market trades up or down significantly early Friday, the trades below may not still be valid. Be very careful! I repeat -- these trades require two things (besides money, of course) -- your attention and self-discipline.
February Quickie #1 - RUT Baby Condor - 626.80
Sell 10 Feb. RUT 620 puts
Buy 10 Feb. RUT 600 puts
Credit of about $2.85
Sell 10 Feb. RUT 630 calls
Buy 10 Feb. RUT 650 calls
Credit of about $3.40
Total net credit and potential profit of $6.25 ($6,250). The maximum profit range is 620 to 630. The maintenance is $20,000. The bail-out parameters are 613.75 and 636.25.
February Quickie #2 - SPX Iron Condor - 1197.01
Sell 10 Feb. SPX 1190 puts
Buy 10 Feb. SPX 1170 puts
Credit of about $3.10
Sell 10 Feb. SPX 1205 calls
Buy 10 Feb. SPX 1225 calls
Credit of about $2.70
Total net credit and potential profit of $5.80 ($5,800). The maximum profit range is 1190 to 1205. The maintenance is $20,000. The bail-out parameters are 1184.20 and 1210.80.
February Quickie #3 - OEX Baby Condor - 574.63
Sell 10 Feb. OEX 570 puts
Buy 10 Feb. OEX 560 puts
Credit of about $1.30
Sell 10 Feb. OEX 580 calls
Buy 10 Feb. OEX 590 calls
Credit of about $.95
Total net credit and potential profit of $2.25 ($2,250). The maximum profit range is 570 to 580. The maintenance is $10,000. The bail-out parameters are 567.75 and 582.25.
Good luck and keep it in your pants if you can't afford to lose it!
February Position #1 - SPX Iron Condor - 1197.01
We sold 10 SPX Feb. 1255 calls and bought 10 SPX Feb. 1265 calls for a credit of about: $.50 ($500). Then we sold 10 SPX Feb. 1140 puts and bought 10 SPX Feb. 1130 puts for a credit of about: $1.00 ($1,000). Our total net credit was $1.50 ($1,500). Maintenance of $10,000. We've created a maximum profit range of 1140 to 1255 -- that's 115 points. If everything works out as planned, our return on risk will be 17.6%. We're still conservative and defensive minded. That's why we're limiting our spread size to 10 points or less.
February Position #2 - OEX Bull Put Spread - 574.63
We sold 15 OEX Feb 530 puts and bought 15 OEX Feb 520 puts for a credit of about $.50 ($750). Our net credit and potential profit is $750. Maintenance of $15,000. We're going to be content to put on the bull put spread for now. If/when the time is right, we'll put on the bear call spread to complete the Iron Condor.
February Position #3 - MSH Iron Condor - 467.72
We sold 10 MSH February 430 puts and bought 10 MSH February 420 puts for a credit of about $.60 ($600). Then we sold 10 MSH February 510 calls and bought 10 MSH February 520 calls for a credit of about $.55 ($550). We have a net credit and profit potential of about $1.15 ($1,150). Our maximum profit range is 430 to 510. 510 looks like solid resistance and 430 is comfortably below other support levels. Maintenance is $10,000.
February Position #4 - SPX Iron Condor - 1197.01
We sold 10 SPX February 1230 calls and bought 10 SPX February 1240 calls for a credit of about $.40 ($400). Then we sold 10 SPX February 1120 puts and bought 10 SPX February 1110 puts for a credit of about $.65 ($650). Our total credit and potential profit is$1.05 ($1,050.) We've created a maximum profit range of 1120 to 1230. Maintenance of $10,000.
MARCH CPTI POSITIONS
March CPTI Position #1 -- MSH Iron Condor - 467.72
The Morgan Stanley High Tech Index has bounced around a bit, but it has some pretty well defined support and resistance levels. The market seems to have settled back into a trading range. Let's hope it behaves.
We sold 10 March MSH 430 puts and bought 10 March MSH 420 puts for a credit of about: $.90 ($900). Then we sold 10 March MSH 510 calls and bought 10 March MSH 520 calls for a credit of about $.35 ($350). Our total approximate credit and potential gain of $1.25 ($1,250). We've established a maximum profit range of 430 to 510. The maintenance is $10,000. The actual exposure is $8,750 ($10,000 less the $1,250 premium received).
March CPTI Position #2 -- SPX Iron Condor - 1197.01
We sold 15 March SPX 1120 puts and bought 15 March SPX 1110 puts for a credit of about: $.50 ($750). Then, we sold 15 March SPX 1240 calls and bought 15 March SPX 1250 calls for a credit of about: $.70 ($1,050). Our total approximate credit and potential gain of $1.20 ($1,800). We've established a maximum profit range of 1120 to 1240. The maintenance is $15,000. The actual exposure is $13,200 ($15,000 less the $1,800 premium received)..
ZERO-PLUS Strategy -
In my Feb. 8, 2004 column, I outlined a strategy based on an initial investment of $100,000. $74,000 was spent on zero coupon bonds maturing in about seven years at a value of $100,000. The principal $100,000 investment is guaranteed. We're trading the remaining $26,000 to generate a "risk free" return on the original investment.
This year, we're going to use the entire $26,000 of extra cash as maintenance for some Iron Condors. That should enable us to generate substantially more profit on this "no risk" strategy.
February Zero Plus Iron Condor Position - SPX - 1197.01
We'll start with our February position #4. However, we're going to sell 20 contracts of the SPX 1120/1110 bull put spread and buy 20 contracts of the SPX 1230/1240 bear call spread for a net credit $1.05 -- giving us a potential profit of $2,100.
QQQ ITM Strangle - $37.15
We own 10 January 2007 $42 puts and 10 January 2007 $32 calls at a total cost of $14,600. Only $4,600 is at risk as the other $10,000 of intrinsic value will always be there. We then sold the March $36 puts and $38 calls, taking in a total of $1.10 ($1,100). If all goes well, the QQQQs will close somewhere between $36 and $38. We will then sell the April near term options, etc. etc. The objective is to sell premium every month for the next 22 months. When all is said and done, we should be able to show a very nice profit.
CPTI & New England Patriots -- A Lot In Common --
Last weekend the eyes of America were on Jacksonville, FL as the New England Patriots beat the Philadelphia Eagles in the Superbowl. In mid March, the eyes of America will again be focused on Jacksonville. Why? Because that's where serious CPTI students will learn how to give the market a beating. Jacksonville is just the first of three stops for the CPTI Profit Train. Don't miss one of my spring's Mike Parnos CPTI seminars.
Since I announced the three seminar dates last week, I've been inundated with over 50 responses by folks who want to reserve spots. I'm going to assume you're a serious options trader or you wouldn't be reading my CPTI newsletter. You want to learn how to position yourself to take advantage of all those directional traders who lose their money betting on whims or the recommendations of others.
Options are marvelous tools -- but you have to know how to use them. There's more to consistently making money than a coin flip and a mouse click. For less than the profit on one Iron Condor trade, you can learn how to put the percentages in your favor. It's knowledge that will last you a lifetime. Join me at one of my CPTI seminars. The dates and locations are:
March 19/20 - Jacksonville, FL
April 16/17 - Chicago, IL
May 14/15 - Irvine, CA
Send me an email at firstname.lastname@example.org and I'll forward you all the details. The spots are filling up fast. Don't be left out! It'll be a weekend you'll never forget!
Remember the CPTI credo: May our remote batteries and self-discipline last forever, but mierde happens. Be prepared! In trading, as in life, it's not the cards we're dealt. It's how we play them.
Mike Parnos, Your Options Therapist and CPTI Master Strategist
Couch Potato Trading Institute Disclaimer
All results reported in this section are hypothetical. While the numbers represented here may have been achieved or beaten by our readers, we make no representation that any individual investor achieved these exact results. The tracking for the plays listed in this section uses closing prices for the day the newsletter is published and it is not meant to imply that any reader actually received those prices or participated in these recommendations (even though many do). The portfolio represented here is hypothetical and for investment education purposes only. It is only an illustration of what type of gains a knowledgeable trader might receive utilizing these strategies. If you don't get close to these results, it ain't the fault of the strategies.