Option Investor
Updates

THE DAY OF RECKONING

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APPROACHES

is near. We shall procrastinate no longer. We shall take responsibility and have seen the error of our (my) ways.

Unless Google moves down about 57 points tomorrow, we're looking at a pretty big loss in this position. There is no magic roll-out or clever strategy that is going to save us. We're going to eat a big frog, so we might as well get out a bottle of fine wine and think of it as a learning delicacy -- an expensive one.

Three Strikes & We're Out - Of Google
Could it have been avoided? Of course, but occasionally my stupidity knows no limits. First, we shouldn't have gotten into the Google position to begin with. Why? Because it's an individual stock. Second, I should have heeded the warning about an upcoming earnings announcement before placing the trade. And, finally, we could have got out of it with a more reasonable $2,500 to $3,000 loss a few times when Google was hovering around $220 back in May.

Much of the same holds true for our CME position. Our mistake was getting into it simply because there was some premium available. This was an individual stock. I broke a cardinal rule. I gave into temptation. It was temporary insanity. At least my sanity returned long enough to close the position for a reasonable loss.

Fortunately, we've had one hell-of-a streak of profitable months. The loss will hurt, but we still have money to trade with and life goes on. Taking a loss is certainly painful, but the pain subsides quickly and there is a tremendous sense of relief. Now we can get a fresh start and return to the strategies (and the rules) that have made us so much money in the past.

The Lone Survivor
Today the SPX closed at 1210.96. Barring some totally absurd event, tomorrow's opening of the SPX should be well below our short 1225 strike price. The profit ($2,100) we're making on the SPX will help to soften the blow of our other two positions. Remember, the symbol for the Friday morning settlement price for the SPX is $SET.

With the low premiums available, we're not able to find many positions. We're not going to sacrifice our safety for the sake of premium. But, we're not going to risk $10,000 to make $300 either. It's a tough environment, but we'll do the best we can.

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On The Lighter Side (Thanks to CPTI Student Hank S.)
What do you throw to a drowning lawyer? His partners.

What does a lawyer use for birth-control? His personality.

What happens when you cross a pig with a lawyer? Nothing. There are some things a pig just won't do.

What's the difference between a lawyer and a vulture? The lawyer gets frequent flyer miles.

If a lawyer and an IRS agent were both drowning, and you could only save one of them, would you go to lunch or read the paper?

How does an attorney sleep? First he lies on one side, then he lies on the other.

How many lawyer jokes are there? Only three. The rest are true stories.

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JUNE CPTI POSITIONS

CPTI June Position #2 - SPX Iron Condor - 1210.96
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 is 1110 to 1225. Maintenance is $15,000.

CPTI June Position #1 - CME Iron Condor - $255.90
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 is anywhere below $230. Maintenance is still $15,000. Position closed for $3,225 loss.

CPTI June Position - GOOG Iron Condor - $277.44 (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 - July SPX Iron Condor - 1210.96
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

July Zero Plus Position: SPX Iron Condor.

We soldl 15 July SPX 1125 puts and bought 15 July SPX 1110 puts for a credit of $.50 ($750). Then we sold 15 July SPX 1255 calls and bought 15 July SPX 1270 calls for a credit of about $.50 ($750). Our total net credit and profit potential is $1.00 ($1,500). Our maximum profit range is 1125 to 1255. Maintenance is $22,500. Remember to adjust the number of contracts to your account size.

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QQQ ITM Strangle - $37.90
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 rolled out of the June $37 calls into the July $37 calls and took in a net credit of $.35.

We bought back our $36 put for a nickel last week and we're waiting to roll it out.

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JULY POSITIONS
CPTI JULY Position #1 - RUT Iron Condor - 644.03
We sold 12 RUT July 580 puts and bought 12 RUT July 570 puts for a credit of $.80 ($960). Then we sold 12 RUT July 670 calls and bought 12 RUT July 680 calls for a credit of $.50 ($600). Our total credit and profit potential is $1.30 ($1,560). The maximum profit range is 580 to 670. Maintenance requirement: $12,000.

This position was suggested on Thursday, June 2 with the RUT trading near 620.

CPTI JULY Position #2 - OEX Iron Condor - 570.42
We sold 15 July OEX 535 puts and bought 15 July OEX 525 puts for a credit of $.45 ($675). Then we sold 15 July OEX 585 calls and bought 15 July OEX 595 calls for a credit of about $.75 ($1.125). Our total net credit and profit potential is $.95 ($1,420). Maximum profit range of 535 to 585. Maintenance is $15,000.

This position was suggested on Wednesday, June 8 with the OEX trading near 565.

CPTI JULY Position #3 - SPX Bull Put Spread (1/2 of Iron Condor) - 1210.96
We sold 15 July SPX 1125 puts and bought 15 July SPX 1110 puts for a credit of $.60 ($900). Our net credit and profit potential for this bull put spread is $900. Maintenance: $22,500. If we have an opportunity to put on a bear call spread, to complete our Iron Condor, at a safe and profitable level, we will. But, we're not going to force anything or compromise our safety.

This position was suggested on Thursday, June 9 with the SPX trading near 1193.

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

WE'VE HAD 29 OUT OF 30 PROFITABLE MONTHS!

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

Spots are filling up fast. There are still some 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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