Updates, Thursday, 02/17/2005 07:11:39 PM ET
HAVING TROUBLE PRINTING?
Going, going, gone . . . That's how it works when expiration arrives and the premium has disappeared from our short options. It's a beautiful thing. Our February positions are in remarkably good shape. Barring some bizarre occurrence, we should be just fine. We have to be aware of the Friday morning open for the SPX settlement price (symbol $SET). The MSH and OEX trade on Friday and will settle on the close. As the late Freddy Prinze used to say, "looking goooood!"
Earlier today I posted a new March position. For those of you who may have missed it (and are too lazy to scroll down - which I can identify with), I'll gladly go over it again.
March CPTI Position #3 - MSH Bull Put Spread - 469.29
The market took a downturn today (Thursday), giving back some recent gains (bullish directional traders eat your heart out). But, that just brought it back to the middle of the range we ad established for March with our MSH position. It also gave us the opportunity to add to our MSH bull put spread position. We already put on 15 contracts of the 430/420 bull put spread. The level is still valid -- plus, there isn't much premium to be found elsewhere. So, WTF, we:
Sold 10 March MSH 430 puts
Bought 10 March MSH 420 puts
For a credit of $.50 ($500)
This is the bull put spread of what we hope will be an Iron Condor position. We'll have to wait for MSH to pop back up before there is any premium in the 510/520 bear call spread. A lot of CPTI students jumped into today's 430/420 bull put spread. I was watching the daily volume and about 150 contracts were traded on each of the strikes at a credit of $.50. There's a good chance the same credit will be available tomorrow (Friday).
March CPTI Position #4 - SOX Iron Condor - 429.78
The SOX is an old friend we haven't visited for awhile. There are some pretty well defined support and resistance levels and there is still a little premium left for us.
Sell 10 March SOX 380 puts
Buy 10 March SOX 370 puts
Credit of about: $.55 ($550)
Sell 10 March SOX 470 calls
Buy 10 March SOX 480 calls
Credit of about: $70 ($700)
Total net credit and potential profit of about $1.25 ($1,250). Our maximum profit range is 380 to 470. The maintenance is $10,000.
Don't Look Now, But . . .
Depending on how the market opens and performs tomorrow, there is a good chance that all of our quickie positions will be profitable -- very profitable! Sometimes we get the bear and sometimes the bear gets us. This month, I think the bear is in big trouble. We'll add it all up in the Sunday column. Don't spend it yet. It ain't over till the fat lady market maker sings (do you think there are any lady market makers?).
FEBRUARY CPTI POSITIONS
February Position #1 - SPX Iron Condor - 1200.75
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 - 573.99
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 - 469.29
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 - 1200.75
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 - 469.29
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 - 1200.75
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 ($1,200). 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 - 1200.75
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 - $37.47
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.
Did You Participate In This Month's PROFITS?
Look at your brokerage account. Is it higher or lower than last month? How many of your trades were profitable? You've been reading my column for years. "PROFITS" are the rule -- not the exception.
Do you want to learn how to position yourself to take advantage of those directional traders who lose their money betting on whims or recommendations? Of course you do. It's not rocket science -- IF you know what to do. My column is a good place to start, but, at my seminars I go into the strategies in more detail than I could ever cover in a column.
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.