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I HATE TAKING LOSSES

HAVING TROUBLE PRINTING?
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-- BUT IT'S PART OF THE BUSINESS

Today was one of those days. From early on, CME thought it was Google. It gapped up and never looked back. The reasonably comfortable 15 point cushion, with two weeks to go, disappeared before our very eyes faster than thoughts of Carmen Electra when your wife walks in the room.

CME snickered at resistance at $220. It laughed at resistance at $225 -- and it was still laughing as it roared through $230 into the wild unknown. We didn't find it quite so funny. We had to bid CME a not-so-fond farewell.

Taking these losses is painful, but we have to remember that it's a cost of doing business. We have to put it into perspective. We've had 29 out of 30 months of profits and this is a drop in the bucket. It's a big drop, but only a drop nevertheless. We played the percentages and cut a potential large loss and we will live to trade another day.

We bought back our short June CME $230 call and sold our long June CME $240 call for a net debit (it's a dirty word) of $3.50. We had 15 contracts, so we spent $5,250. We had taken in a total of $2,025. Our net loss on the position was $3,225.

It looks like, at June expiration, we're going to have to change our promo to 29 out of 31 profitable months. I'm still very proud of it and, never fear, we will continue to generate dollars. We have to take a macro view as opposed to a micro view.

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QQQQ ITM Strangle - Position Adjustment
The market has moved up a bunch in the last few weeks. The QQQQs are trading at $38.66. The value of our short June $36 put has dwindled to where it will only cost us $.10 to buy it back. If we buy it back for a dime, we're only spending a nickel over and above what we would normally spend to close out the position near the end of the option cycle. The benefit to buying it back sooner is that we would then be in a position to, on a pullback, sell another June put or perhaps a July put. For the cost of a nickel, be might be able to brink in a few extra bucks.

At this writing, it looks like the QQQQs might open up higher tomorrow. The buyback price might only be a nickel. Throw out the order for a nickel. You have nothing to lose and you might just get filled. If not, the dime will be there.

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New July RUT Iron Condor Position
Today, we sold 12 RUT July 580 puts and bought 12 RUT July 570 puts for a credit of about $.80 ($960). Then we sold 12 RUT July 670 calls and bought 12 RUT July 680 calls for a credit of about $.50 ($600).

Total appx. credit and profit potential of $1.30 ($1,560). The maximum profit range is 580 to 670. Maintenance requirement: $12,000. Remember to adjust the number of contracts to the size of your trading accounts.

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A Word Of Warning - Read The Columns Carefully!
This is addressed primarily to the many new subscribers and students of the CPTI. Today I received an email from someone who, only two days ago, entered the June CME $230/$240 bear call spread -- when CME was trading over $211. That was not a good idea. The position was initiated when CME was trading under $200.

He saw the position listed in my regular Sunday (5/29) column and misinterpreted that as being a new recommendation. Today, when he saw CME racing higher, it was "Help! What do I do?"

The poor guy is going to take a hit (but then, so did we) on what might have been his first trade. But his could have been avoided. I like to think I'm pretty clear when announcing a potential new position.

I just want to make sure that there is no question or confusion when I put out a new position for consideration. I did it today -- on the RUT. I explained in detail that it was a new CPTI portfolio position. There were no gray areas -- no room for confusion. Different readers will get filled at any number of prices -- some higher and some lower than the estimated premium credit.

In future columns, this RUT position will be listed as an existing CPTI portfolio position. It will be a golden oldie (and hopefully a goodie). It is not meant to be a new recommendation. So, new subscribers, please be careful. Don't take anything for granted. If you have a question, I'm pretty easy to find and I try to respond in a timely manner.

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On The Lighter Side - "Signs Of The Times"

In an office: TOILET OUT OF ORDER...... PLEASE USE FLOOR BELOW

In a Laundromat: AUTOMATIC WASHING MACHINES: PLEASE REMOVE ALL YOUR CLOTHES WHEN THE LIGHT GOES OUT

In a London department store: BARGAIN BASEMENT UPSTAIRS

In an office: WOULD THE PERSON WHO TOOK THE STEP LADDER YESTERDAY PLEASE BRING IT BACK OR FURTHER STEPS WILL BE TAKEN

In an office: AFTER TEA BREAK STAFF SHOULD EMPTY THE TEAPOT AND STAND UPSIDE DOWN ON THE DRAINING BOARD

Outside a secondhand shop: WE EXCHANGE ANYTHING - BICYCLES, WASHING MACHINES, ETC. WHY NOT BRING YOUR WIFE ALONG AND GET A WONDERFUL BARGAIN?

Notice in health food shop window: CLOSED DUE TO ILLNESS

Spotted in a safari park: ELEPHANTS PLEASE STAY IN YOUR CAR

Seen during a conference: FOR ANYONE WHO HAS CHILDREN AND DOESN'T KNOW IT, THERE IS A DAY CARE ON THE 1ST FLOOR

Notice in a farmer's field: THE FARMER ALLOWS WALKERS TO CROSS THE FIELD FOR FREE, BUT THE BULL CHARGES.

On a repair shop door: WE CAN REPAIR ANYTHING. (PLEASE KNOCK HARD ON THE DOOR - THE BELL DOESN'T WORK)

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JUNE CPTI POSITIONS
CPTI June Position #2 - SPX Iron Condor - 1204.29
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 - $232.00
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 new bull put spread is $185/$175. Our new net credit is now $1.35 ($2,025). New maximum profit range of $185 to $230. Maintenance is still $15,000. Position closed for $3,225 loss.

CPTI June Position - GOOG Iron Condor - $266.00 (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 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 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 (Maybe Not June)

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QQQ ITM Strangle - $38.66
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.

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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! The price is right and it will be an experience you'll never forget.

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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