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PUTTING ON THE CONDORS

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After threatening to bust out to the upside, it appears that the market has settled back into its trading range. For us, that couldn't be better. How long will it last? Well, since we've already been putting on August positions, let's hope for at least another seven weeks. Remember, August has a five-week option cycle -- that will test our patience and the market's neutrality.

We had a busy week. On Tuesday we put on the August SPX 1265/1285 bear call spread to complete our August Iron Condor. Then, on Friday, we put on an August SOX Iron Condor. (see the details below). It's funny. When we put on two trades in a week, it's busy.

I've had a number of emails asking me how they should put on the Iron Condors. Should they put the bull put spread on separately from the bear call spread? Well, as you know, only the best brokers will allow you to put both spreads on in a single trade. It seems that, with some indexes, it's a good idea. But with other indexes, when you're trying to negotiate a lot from between the bid/ask spread, you may be better off putting the spreads on separately.

I don't mean to first buy the long put and then sell the short put of a bull put spread. Believe it or not, some traders are still with brokers that cannot put on a spread as one trade. If you put the spreads on separately, you can take advantage of interday market fluctuations.

If you are asking for $.70 on a bull put spread, you can place the order. It might not get filled immediately, but during the day the market might move down a few points and your order might get filled. Then, the same holds true for the bear call spread. It's likely that, during the day the market will also move up a few points -- filling the bear call spread.

The only problem is that there are no guarantees. If you put the spreads on separately, you take the change that the market will continue in one direction, that it will not bounce back to enable you to fill the other spread. Sometimes, you may end up with just one spread filled instead of the entire Iron Condor. That is certainly not the end of the world. Though it's not the most efficient use of your maintenance dollars, sometimes, it's even preferable to just have one side of an Iron Condor.

The problems arise when you have one spread filled. Then, in desperation, you lower the strike prices of the opposite spread to get filled. Remember, we never want to compromise safety for a few dollars of premium. You've seen that, when things go wrong, they can go very wrong. Just be careful. Don't put yourself in harm's way.

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SEMINAR REMINDER
With two weeks to go, there are still spots remaining for the Philadelphia July 16/17 seminar. I know a lot of traders take vacations in July. If you are serious about trading, you should consider attending the seminar. They are two days that could help you pay for vacations for years to come. My contact information is in the seminar promo below. I'd love to meet you. Don't procrastinate.

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Quotes To Remember
"Expecting the world to treat you fairly because you are good is like expecting the bull not to charge because you are a vegetarian." --Dennis Wholey

Mark Twain sat on the train next to a gloom-and-doomer who said, "Do you realize that every time I take a breath, 10,000 people on this planet die?" Twain replied, "Hmmm...ever try cloves?"


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JULY POSITIONS
CPTI JULY Position #1 - RUT Iron Condor - 643.04
On Thursday, June 2 with the RUT trading near 620, 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.

CPTI JULY Position #2 - OEX Iron Condor - 558.88
On June 8 with the OEX trading near 565, 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.

CPTI JULY Position #3 - SPX Bull Put Spread (1/2 of Iron Condor) - 1194.44
On Thursday, June 9 with the SPX trading near 1193, 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.

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AUGUST POSITION
CPTI AUGUST Position #1 - SPX Iron Condor - 1194.44
On Thursday, June 23 with the SPX trading near 1200, we sold 12 Sell 12 SPX August 1140 puts and then bought 12 SPX August 1125 puts for a credit of $1.30 ($1,320). The market moved down in the morning and we were able to get filled at $1.30. Some CPTI traders who were late to the dance got even more.

Then, on June 28th, we sold 12 SPX August 1265 calls and bought 12 SPX August 1280 calls and actually got filled at $.70 ($840), although we placed the order for $.65. That is not an unusual occurrence when you have the right broker.

Our total net credit for the Iron Condor is $2,160. Our maximum profit range is 1140 to 1265. That's pretty comfortable, but we have to wait for another seven-plus weeks. Maintenance is $18,000.

CPTI AUGUST Position #2 - SOX Iron Condor - 419.36
On Friday, July 01, with the SOX trading near 420, we put on an Iron Condor.
We sold 12 SOX August 380 puts and bought 12 SOX August 370 puts for a credit of $.60 ($720). Then we sold 12 SOX August 465 calls and bought 12 SOX August 475 calls for a credit of about $.60 ($720). Our total net credit and profit potential of about $1.20 ($1,440). Our maximum profit range is 380 to 465. Our maintenance is $12,000 -- if you have the right broker.

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ONGOING STRATEGIES
ZERO-PLUS Strategy - July SPX Iron Condor - 1194.44
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 sold 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 - $36.72
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 of the June $37 calls into the July $37 calls and took in a net credit of $.35. We rolled out our June $36 put to the July $37 put for a net credit of $.20. That means we have taken in a total of $.55 ($550). Our current short positions are the July $37 puts and $37 calls. Our new total of generated premium is $4,400 ($3,850 + $550).

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COUNTDOWN TO PHILADELPHIA -- 13 DAYS -- ONLY A FEW SPOTS REMAIN!!!

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

WE'VE HAD 29 OUT OF 31 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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