Option Investor
Updates

PHONE SKILLS CAN EQUAL BETTER FILLS

HAVING TROUBLE PRINTING?
Printer friendly version

Everyone who is worried that the market is going down too fast raise your hand. OK, first put down your beer. Now, raise your hand.

Ups and downs. That's what makes markets - and that's what makes trading ranges. If you can learn to put these "ups and downs" into perspective, your time on the "therapy couch" will become less and less. In life there are emotional ranges - just like there are trading ranges in the markets. Can you identify yours?

Today let's explore how we express ourselves. In trading, how we express ourselves to our brokers can make a big difference in our bottom line. There is a right way and a wrong way.

Oh, you can all put your hands down now.

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

Using Your Mouth Instead Of Your Fingers

God gave us opposable thumbs - and they come in handy, especially when it comes to using our computer mouse (and, of course, eating). Modern technology has given us the ability to maneuver our way around a brokerage site to do our trading. These days, most of us do our trading online. We do the research. Check out the option chain, get the option symbol, and type it into the online order page. We click "send" and our precious order disappears into the wild blue yonder only to appear on a market maker's board somewhere. Face it. It's magic, but it works.

That's all fine and good, but we know how seldom things go exactly according to plan. It's inevitable. There will come times when you have to communicate with those nice people at your brokerage firm. Perhaps your order didn't get filled. Maybe the results weren't reflected properly in your portfolio. Maybe you have questions about maintenance requirements. Maybe the TV is broken and you're just lonely. Whatever.

Plus, though technology is indeed wonderful, there are still some traders who are still more comfortable placing their orders on the telephone. Well, let's devote a few paragraphs to the proper way to place your option order on the telephone.

I mentioned earlier that the folks at the brokerage firms that take your calls are nice folks. Basically, they are. Keep in mind that they spend their entire workday answering the phones, fielding a variety of questions and complaints. You know that, when you call, they have just finished a 45-minute call with some 80-year-old woman who doesn't understand why $.35 disappeared from her account. It's not an easy job. It requires a substantial knowledge base, almost as much patience and a truckload of tolerance and self-control. The least we can do is give them all the information they need to do their job as effortlessly as possible. The last thing a phone broker wants to do is have to interrogate you to get the information. Have what you're going to say all planned out.

Placing The Order

Here is a list of what you need before you pick up the phone to dial.

1. Your account number.

2. The type of order you want to place.

3. Are you buying to open, selling to open, buying to close or selling to close?

4. The number of contracts.

5. The option symbol. (4 or 5 letters - can usually be found on most option chains)

6. The debit or credit amount.

7. Is it a limit or market order? (it should be a "limit" order 90% of the time)

8. The duration of the order. (day order, good till cancel, all or none)

This information gives your new phone buddy all the information he/she needs to efficiently process the order in a timely fashion - and I emphasize "timely" fashion. Why? Because, while you're fumbling around for the pertinent information, the market can move against you. That can change the option prices and render your order obsolete. The less time you spend on the phone, the better chance you have of getting your order filled at the price you want.

You ask, "With everything now being done online, why do we have to talk to brokers?" Believe me, we live in an imperfect world. Your computer will crash or freeze and the most inopportune times -- like in the middle of a trade. The brokers system will be down the one day of the month that you want to trade.

Also, there are occasions where your computer quotes tell you that your trade should have been filled, but it wasn't. It's a good idea to get on the phone to your broker and bring it to the attention of your broker. They have the ability to pull up "time and sales" information. If it substantiates your belief that you were entitled to a fill, the broker can facilitate it.

A Typical Phone Order

"This is Ellen Degenerate, account number 8046-1228. I'd like to put on a bull-put spread trade on the S&P 500 index. I want to sell to open 10 contracts of the SPQTO puts and buy to open 10 contracts of the SPQTJ puts for a credit limit of three dollars. This order is good for the day."

The phone rep will then repeat it back to you, using the actual months, to confirm that is what you meant. Listen carefully. This is your chance to catch any mistakes. The phone call is being recorded to make sure your order was placed as described and to resolve any discrepancies that may arise.

Checking On Your Order

The same principals apply to checking to see if your order has filled. Be pleasant. Be concise. Also, if your order has not been filled and you wish to change it, make that decision before you pick up the phone.

"This is George W., account number 8046-1228. Earlier I placed a bull-put spread order on the S&P 500. I'd like to check and see if it has been filled."

If your order has been filled, you can return to your couch and play with your remote control. If your order hasn't been filled, you would say, "Thank you for checking. I would like to lower the credit limit on that same order from $3.00 to $2.80."

The representative will then repeat the order back to you, with the new credit limit. Once you approve, he will make the appropriate adjustment.

Basically, we're just talking about common courtesy and common sense. You'd be surprised how little of each exists in the real world and in the trading world. People become emotional, excited, confused and indecisive. All four of the above can cost you dearly - in your life choices and on your financial bottom line. Keep yourself under control and it's amazing how your personal life and your trading life will smooth themselves right out.

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

NEW SEMINAR DATE TO BE ANNOUNCED SOON

Ladies and gentlemen, boys and girls, stay tuned to this space and your email box. I'm in the process of putting together the details for another CPTI Advanced 2-day seminar for August. What a great summer vacation idea. Great weather, great people, great information. I can't guarantee the weather, but I can guarantee that you'll have a great time at the seminar and come away with a ton of very valuable information that will take your trading to the next level.

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

MAY CPTI POSITIONS
May CPTI Position #1 - SPX Iron Condor - 1154.05
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 - 191.15
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). Closed for $2,280 loss.

May CPTI Position #4 - SPX Iron Condor - 1154.05
We sold 20 SPX May 1210 calls and bought 20 SPX May 1220 calls for a credit of about $.45 ($900). Then we sold 20 SPX May 1105 puts and bought 20 SPX May 1095 puts for a credit of about $.60 ($1,200). Our total net credit and profit potential is $1.05 ($2,100). Maximum profit range is 1105 to 1210. Maintenance: $20,000.

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

ONGOING STRATEGIES
ZERO-PLUS Strategy - May Iron Condor Position - SPX - 1154.05

Profit: $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 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.

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.

May Zero Plus Position: SPX Iron Condor - 1156.85Sold 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 - $36.24
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.

We took advantage of the downdraft of the market to buy back our $37 calls for $.05. The order was there as a GTC (good till cancel) order since the original May rollout. The market spiked down and it got filled. Now, we will look for an opportunity, on a bounce, to sell another May option and take in an extra bit of premium.

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

JUNE CPTI POSITIONS
CPTI June Position #2 - SPX Iron Condor - 1154.05
Our favorite index just keeps on giving. We'll keep on taking.
We sold 15 June SPX 1110 puts and bought 15 June SPX 1100 puts for a credit of $.70 ($1,050). Then we sold 15 June SPX 1225 calls and bought 15 June SPX 1235 calls for a credit of about $.70 ($1,050). Our net credit and profit potential is $140 ($2,100). Maximum profit range of 1110 to 1225. Maintenance is $15,000.

CPTI June Position #1 - CME Iron Condor - $191.15
CME has been good to us over the last few months. We'll give it another chance to be good to us again.

We sold 15 June CME $170 puts and bought 15 June CME $160 puts for a credit of $.60 ($900). Then we sold 15 June CME $230 calls and bought 15 June CME $240 calls for a credit of about $.50 ($750). Our net credit and profit potential is $1.10 ($1,650). Maximum profit range of $170 to $230. Maintenance is $15,000.

CPTI June Position - GOOG Iron Condor - $229.24 (Formerly May Position)
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.

We bought back the May bear call spread and rolled out to the June $220/$230 bear call spread. We also bought back the May $160 put for a nickel. Our new credit and profit potential is now $2,260.

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

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

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!!

Spots are still left for my July Philadelphia CPTI 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 -- SOLD OUT!!
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!

You should really try and make one of these seminars, if you can. With what you learn, you'll see a substantial increase in your trading results. If you've already signed up, I'll see you there. If you haven't signed up, what are you waiting for?

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

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