Option Investor
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FOR 2-CENTS PLAIN AND SIMPLE

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This week has been relatively uneventful -- except the market seems to have some unexplained strength. For the moment, things seem to be under control. We've been trying to find more June positions without much success. Because we're not trading, doesn't mean we can't do something constructive.

Being the Head Couch Potato and The Options Therapist brings with it the responsibility to dispense advice. Believe me, talk is cheap and I get my money's worth. Remember, my 2-cents is usually worth exactly that - 2 cents. I was a radio talkshow host in a previous life (about 15 years ago) and I do regress from time to time.

Having self-discipline in trading is essential to being a successful trader. Take a look and see if that same self-discipline spills over into your everyday life.

Lately, I've been getting emails from folks who complain about money problems. Money problems are just one complication of life. If examined closely, you'll find that 90% of the bad things that happen to you, didn't have to happen. These are things you bring on yourself in some way. Most of them could have been avoided by the use of self-discipline.

Therapy is a good start. It's an awareness generator. Trading therapy is the same as life therapy. But, all therapy can do is make you aware. It allows you to pause for a moment before you take action, thereby giving you a chance to make a decision. Rather than being purely impulsive, you have an opportunity to decide if the action you are about to take is, or is not, in your best interest.

You're not always going to make the right decision, but at least you have a decision to make. If you feel you are about to do something foolish, it's always a good idea to have someone to call -- a support system -- someone who will help you think through the situation and reinforce the positive choice.

That's only one of the things we discuss at our CPTI seminars. We have a segment called "Traders Anonymous." I pattern it after Alcoholics Anonymous. Attendees take a turn coming up to the podium and discussing trades that did not work out. We then examine those trades -- figuring out what was done right, what was done wrong, and alternative ways of approaching the situation. It's a great educational too. And, the many who have participated will also tell you it's a lot of laughs as well.

By the time the two days are over, seminar attendees will have been interacting, making friends. Names, phone numbers and email addresses are exchanged. Alliances are formed. Support systems are created. It's not unlike the "sponsor" that alcoholics have. When alcoholics are tempted to drink, they can call their sponsor to help them exercise their self-discipline. CPTI students can help each other. For many, trading is a lonely business, but it doesn't have to be.

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This Week
This week we have made two position adjustments. Nothing major -- just a few tactical moves.

1) CME Iron Condor - We closed out the May CME $170/$160 bull put spread for a nickel. Then sold the May CME $185/$175 for a credit of $.30. Our net credit was $.25 x 15 contracts = another $375.00 in our pocket. Our new profit potential for our June CME Iron Condor is $2,025. See position description below for details.

2) QQQQ ITM Strangle - We bought back our short May $36 put for $.10. We did this with the anticipation that the market may pull back at some point in the next three weeks. If it does, we'll be ready to pick up a few extra premium dollars by selling another near term put. If it doesn't pull back, we've only risked a nickel.

The Google Plan
Don't try this without adult supervision. Google has gone crazy with anal-ysts projecting Google to trade over $300. Well, that's just dandy. We are a bit underwater (to say the least) with this position. But, alas, I have a plan. Follow my thinking.

We currently have the June $220/230 bear call spread. The May bull put spread expired worthless. Having the June bear call spread, we have $12,000 being tied up in maintenance. This enables us to put on a brand new bull put spread -- and it would be covered by the same $12,000 of maintenance. So, what if we rolled out our GOOG June bear call spread to the Jan. 2007 LEAPS $220/230 bear call spread? Then, we will sell a bull put spread below where Google is trading each month with the objective of taking in about a dollar. In 12 months (maybe less) we will have taken in enough premium to offset the $10 difference between the strike prices that we are currently risking.

Now, it sounds like an interesting solution. But, don't get too excited. I'm going to have to run this by my broker. Why? Because, even though this looks like a version of a calendar spread, we might have a problem with maintenance requirements. The fact that both spreads will not be for the same month, may require additional maintenance. That would, in effect, negate all this good creative thinking.

I will call my broker (Mike Cavanaugh at BrokersXpress.com) to clarify the situation and I'll report back -- hopefully tomorrow. It don't think it would pay to do this month by month. Too many commissions and bid/asks.

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Memorial Day Weekend
Monday the markets will be closed for trading. Why am I reminding you of that now? Because Saturday, Sunday and Monday are three more days of time erosion. That's good for the positions we already have. However, if we are looking to add positions for June, Friday (tomorrow) would offer more premium than next Tuesday.

Finding positions for June has been very difficult. Don't force anything. I just want to remind you that you should NEVER compromise safety for the sake of a few dollars of premium. You don't have to trade every month. In a week or two, we can start looking at July positions. Be patient, my friends.

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We Can't Go A Day Without A Rationalization
A herd of buffalo can move only as fast as the slowest buffalo. When the herd is hunted, it is the slowest and weakest ones at the back that are killed first. This natural selection is good for the herd as a whole, because the general speed and health of the whole group keeps improving by the regular killing of the weakest members.

In much the same way the human brain can only operate as fast as the slowest brain cells. Excessive intake of alcohol, we all know, kills brain cells, but naturally it attacks the slowest and weakest brain cells first. In this way regular consumption of beer eliminates the weaker brain cells, making the brain a faster and more efficient machine. That's why you always feel smarter after a few beers, and that's why beer is so GOOD for you!

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JUNE CPTI POSITIONS
CPTI June Position #2 - SPX Iron Condor - 1197.62
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 - $212.31
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). We made a position adjustment -- see above article for description. Out new bull put spread is $185/$175. Our new net credit and profit potential is now $1.35 ($2,025). New maximum profit range of $185 to $230. Maintenance is still $15,000.

CPTI June Position - GOOG Iron Condor - $259.20 (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.

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ONGOING STRATEGIES
ZERO-PLUS Strategy - June
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 May, we placed an SPX Iron Condor with a total net credit was 2,000. It expired worthless. Our new cash position is: $29,500 + $2,000 (May Profit) = $31,500

June Zero Plus Position: Coming Soon

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QQQ ITM Strangle - $38.19
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 May options to June (see details above) and took in a net of $800. Our new total of income generated is $3,850 ($3,050 + $800). We are short the June $37 calls and $36 puts.

We bought back the $36 puts for $.10. (see article above).

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

WE'VE HAD 29 OUT OF 30 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:
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?

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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

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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.

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