Option Investor
Updates

GOOGLE ON YOUR MIND

HAVING TROUBLE PRINTING?
Printer friendly version

I have received a number of emails about the CPTI Google position -- understandably so. Some folks want to, or have already, closed their position. Others are willing to hang on a little longer to see if the market over-reacted to the earnings announcements.

A few readers asked, "You closed the MID position when it was 10 points away from the short strike last week. Why are you still holding onto GOOG?" It's a legitimate question. While I encourage you to be diligent in adhering to your exit points, there are occasional circumstances that merit a closer look.

About a year ago (4/23/04), we had an Iron Condor on BBH (the biotech holder index) in our CPTI portfolio. The bear call spread was $155/$165 and BBH was trading at $150. One fine day an announcement came out that some biotech company found a cure for cancer. My first thought was that the chance of them having found a cure for cancer was about the same as me winning the Boston marathon.

The market, however, bought into it and BBH traded all the way up past $160. Before the day was over, BBH began to retreat. I held onto the bear call spread. It was just a matter of about three days before BBH had filled the huge gap and was trading right back where it started. Our bear call expired worthless and we made a nice profit on our Iron Condor.

Is the Google situation the same? Well, there is probably a little more legitimacy to the Google earnings report than the BBH cancer find. However, Google ran up almost ten points prior to earnings and then traded up another 15 points on the announcement. Personally, I believe that's a bit much. The trading multiple is huge. This is a one stock Internet bubble waiting to happen. It's also likely that part of the run-up was short covering. To make a long story longer, I'm hanging on because there's a huge gap to fill and I believe Google is ahead of itself. That's my two-cents -- and that's probably all it's worth. If I'm wrong, I'm willing to pay the price.

Those who want to close the position are doing the prudent thing. Based on Friday's numbers, if you had a 10-contract position, it would cost you $3.00 (perhaps less with some negotiation). We took in about $1.40. Therefore, you could close the GOOG bear call spread and accept a loss of only $1,600. That's a very reasonable approach. It's your choice.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

PERHAPS AN ALTERNATIVE
There's a survey being circulated on OptionInvestor. The (new) powers that be are trying to determine the degree of interest of OI readers in having me manage some of their money using our CPTI trading strategies. This might be a solution for CPTI students who would like to participate in profits, but, for whatever reason, prefer not to do the trading themselves.

Again, this project is in the developmental stage. I have been approached and am open to the idea. There are many details to work out. If the idea appeals to you, click on the link below, fill it out and you will be contacted. Also, as I am made aware of progress or a timeline, I will certainly pass the information along to all of you.

Here is the link: http://www.surveymonkey.com/s.asp?u=84711023095

There's a place in this short survey where it asks for your input. Don't be shy about sharing your thoughts -- good, bad or indifferent. The more feedback they get, the better they will be able to put the whole thing together.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

THOUGHTS ON MONEY
"Do yourself a favor and master the art of money. Treat it as an
honored guest in your life, one who will quickly flee if you do
not treat her well, but one who will stay and enrich your life
beyond measure if you treat her with care and respect."
-- Philip E. Humbert

"It's good to have money and the things that money can buy, but it's good, too, to make sure you haven't lost the things that money can't buy."
-- George Horace Lorimer

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

MAY CPTI POSITIONS
May CPTI Position #1 - SPX Iron Condor - 1152.12
We sold 15 SPX May 1100 puts and bought 15 SPX May 1090 puts for a credit of $.60. Then we sold 15 SPX May 1235 calls and bought 15 SPX May 1245 calls for a credit of $.75. Our total net credit is $1.35 ($2,025). We have a maximum profit range of 1100 to 1235. The bigger the better!! Maintenance is $15,000.

May CPTI Position #2 - CME Iron Condor - 171.00
We sold 15 CME May 155 puts and bought 15 CME May 145 puts for a credit of $.65. Then we sold 15 CME May 230 calls and bought 15 CME May 240 calls for a credit of $.40. Our total net credit and profit potential is $1.05 ($1,575). Our maximum profit range is 155 to 230. The maintenance is $15,000.

May CPTI Position #3 - MID Iron Condor - Closed For $2,280 Loss
We sold 12 May MID 620 puts and bought 12 May MID 610 puts for a credit of $.65 ($780). Then we sold 12 May MID 700 calls and bought 12 May MID 710 calls for a credit of about $.45 ($540). Our total net credit and profit potential of $1.10 ($1,320).

May CPTI Position #4 - GOOG Iron Condor - $215.81
We sold 12 GOOG May 160 puts and bought 12 GOOG May 150 puts. We also sold 12 GOOG May 220 calls and bought 12 GOOG May 230 calls. Our total net credit and profit potential is $1.40 ($1,680). Our maximum profit range is $160 to $220. Maintenance is $12,000.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

ONGOING STRATEGIES
ZERO-PLUS Strategy - May Iron Condor Position - SPX - 1152.12

Profit Potential: $2,000.
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 using 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.

In April, we placed a SOX 450/460 and 380/370 Iron with a total net credit was $.85 ($1,700). It expired worthless and our profit was the entire $1,700. Our new cash position is: $27,800 + $1,700 = $29,500.

New May Zero Plus Position: SPX Iron Condor - 1159.95
Sold 20 SPX May 1210 calls and bought 20 SPX May 1220 calls for a credit of $.45 ($900). Then sold 20 SPX May 1090 puts and bought 20 SPX May 1080 puts for $.55 ($1,100). Our total net credit is $1.00 ($2,000).

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

QQQ ITM Strangle - $35.09
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.

We rolled out our short April options to the May $36 puts and $37 calls and took in another $950. Add that to our previous cash total of $2,100 and we now have generated a total of $3,050.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

NEW SUMMER SEMINAR DATE: JULY 16 & 17 -- PHILADELPHIA, PA

We had a great group of students in Chicago last weekend. A lot of knowledge was passed on and there were a lot of laughs along the way. We spent two days going over, step by step, how to select an index, choose a profit range, pick strike prices, and place the trade. The most popular topics were: 1) how to capture premium; 2) how to know what the market makers are looking for; 3) how to place the trades; and 4) what adjustments can be made if the trade goes bad. Do you have the answers? If not, you aren't likely making the most of the strategies you are using.

WE'VE HAD 28 OUT OF 29 PROFITABLE MONTHS -- WITH NO END IN SIGHT.

WANT TO ACHIEVE SUCCESS WITHOUT STRESS WITH CPTI WEALTH-BUILDING TECHNIQUES? OF COURSE YOU DO!!

There are still spots left for the May IRVINE, CA seminar, and now, of course for the new PHILADELPHIA, PA seminar. They probably won't last long, so be proactive! That means GOYA. Contact me at mparnos@optioninvestor.com and I'll reserve a spot for you. He who hesitates may be SOL.

The dates and locations are:
May 14/15 - Irvine, CA
July 16/17 - Philadelphia, PA

Send me an email at mparnos@optioninvestor.com and I'll forward you all the details. Don't be left out! The spots are filling up fast. It'll be a weekend you'll never forget! SERIOUS OPTION TRADERS ONLY! Directional trader converts welcome!

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

HAPPY TRADING!
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, guess what? It isn't the fault of the strategies.

Couch Potato Trader Updates Archives