Option Investor
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THE COUCH POTATO RETURNS -- INTACT

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I made it -- home safe and sound -- having spent two of the most enjoyable weeks of my life in a distant land. I spent most of the two weeks in a city called Davao -- in the southern part of the Philippines. They are known for having the second highest quality water in the world. Even though the water was pure, I didn't have any. I didn't want to take any chances. I stuck with Diet Pepsi. I was only going to be there for about two weeks and I didn't want to spend a large part of my trip fighting off Montezuma's revenge.

One of the most incredible things I witnessed on the trip was the fact that there were virtually no traffic lights in the city. There were main streets, side streets, etc. -- but no traffic lights. It was like a giant game of chicken. These little cars and little busses, etc. would approach each intersection and, one by one, force their way through. Then, there were also motor scooters with three passengers, guys on bicycles with sidecars filled with passengers. And let's not forget the pedestrians, whom I'm sure had a death wish. All of these elements converge in a single intersection. It was chaos in a sea of annoying horns, but, in the two weeks, I didn't see anyone get hit. So, it must have been an organized kind of chaos. I guess they've had a lot of practice and a lot of patience. In the two weeks, I did not hear a single curse word -- at least not in English. So, I felt obligated to share a few of my favorites from time to time -- without using acronyms. Now, they're ready for anything.

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NEW POSITION ALERTS
I know there are three weeks left in the September cycle, but I've always been a forward (looking) kinda guy. Let's check out what looks to be a few pretty safe positions for the October cycle. I know it's early, but I learned more about patience in the last few weeks. These trades will take some patience.

CPTI October Position #1 - SPX Bear Call Spread - 1205.10
Sell 15 SPX October 1280 calls
Buy 15 SPX October 1290 calls
Credit of about $.60 ($900)

With the SPX at about 1205, we have a 75-point cushion. The maintenance for this bear call spread is $12,000. We will look for the market makers to open up more strike prices on the lower end so we can possibly put on the bull put spread to complete our Iron Condor.

CPTI October Position #2 - OEX Iron Condor - 558.79
With the OEX at about 559, this looks like a trade with a high probability of success.
Sell 15 OEX October 590 calls
Buy 15 OEX October 600 calls
Credit of about $.55 ($825)

Sell 15 OEX October 525 puts
Buy 15 OEX October 515 puts
Credit of about $.75 ($1,125)

Our credit and potential profit is $1,950. Maximum profit range is 525 to 590. Maintenance is $15,000.

These prices are based on Friday's closing numbers. The numbers on Monday may very well be different. Remember, we are trying to negotiate premium from the bid/ask spread of all the options when possible. Adjust the number of contracts to your account size and always use limit orders when you place these spread orders.

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SEPTEMBER POSITIONS
CPTI SEPTEMBER Position #1 -- SPX Iron Condor - 1205.10
On July 29 with the SPX trading at about 1240, we sold 12 SPX September 1175 puts and bought 12 SPX September 1160 puts for a credit of about $.80 ($960). We had about a 65 point cushion -- and various support levels above. We then sold 12 Sept. SPX 1265 calls and bought 12 Sept. SPX 1280 calls for a credit of $.85 ($1,020). Our total credit and profit potential is $1,980. Our maximum profit range is 1175 to 1265. The maintenance for the entire position is (if you have the right broker) $18,000.

CPTI SEPTEMBER Position #2 - RUT Iron Condor - 648.64
On August 3 with the RUT trading at about 685 we sold 12 RUT September 630 puts and bought 12 SPX September 620 puts for a credit of $.85 ($1,020). The cushion is about 55 points with support levels above the short strike price.

Then, on Monday, we sold 12 Sept. RUT 690 calls and bought 12 Sept. RUT 700 calls for a credit of about $.85 ($1,020). Our total credit and profit potential is $2,040. Our maximum profit range is 630 to 690. The maintenance for the entire position (if you have the right broker) is $12,000.

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ONGOING STRATEGIES
ZERO-PLUS Strategy - September SPX Iron Condor - 1205.10
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.

Our new cash position is: $31,500 + $1,500 (July Profit) = $33,000

Earlier this week we sold 20 SPX 1165 puts and bought 20 1150 puts for a credit of $.65 ($1,300). We also put on the bear call spread for our September Iron Condor. We sold 20 Sept. 1265 calls and bought 20 Sept. 1280 calls for a credit of $.85 ($1,700). No additional maintenance was required. Our maximum profit range is now 1165 to 1265. Total potential profit is $3,000.

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QQQ ITM Strangle - $38.46
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).

Normally, if I had been able to access the internet, our rollout might have been a little different, but probably not much. But, looking at the closing quotes of Friday, you should have bought back the August $37 calls for about $1.90 and rolled them to the September $37 calls for about $2.00 (a credit of $.10 or $100). The August $37 puts would have expired worthless and you can simply sell the $37 September puts for another $.10 or $100).

So, for the September expiration cycle, we're only going to take in about $200 while we patiently wait for the QQQQs to come back down. Remember, this strategy requires a belief that the QQQQs will regress to the "mean" area of about $36 to $38. The success of this strategy is an average of premium taken in over an long period of time.

Based on these figures, the new total of generated premium is about $5,100 ($4,900 plus the $200).

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TWO CPTI SEMINAR DATES!!

NEW CPTI SEMINAR DATE #1 -- DENVER, CO - OCT. 15/16
NEW CPTI SEMINAR DATE #2 -- DETROIT, MI - NOV. 5/6

We have liftoff, folks. I received an enthusiastic response from the good people in the Denver area. I'm pleased to announce the next CPTI seminar will take place on Saturday & Sunday, October 15th & 16th in Denver. Then, the next will be in Detroit on November 5th & 6th.

Our CPTI seminars are limited to ONLY 25 ATTENDEES. If you're a serious options trader and you want to learn the nuances of our advanced non-directional trading strategies and hone your trading skills, contact me ASAP at mparnos@optioninvestor.com. I'll send you all the pertinent information. The price is right -- $995.00 -- less than one profitable Iron Condor trade -- and you'll have a two-day experience that you'll remember, and profit from, for a lifetime.

Our recent Philadelphia CPTI Seminar was a great success (they all are). There are now 25 newly enlightened minds, with smiles attached, ready to generate a healthy annual return using our CPTI strategies. Remember, if you attend one of my CPTI seminars, you are entitled to retake the seminar a second time at NO CHARGE!

30 OUT OF 33 PROFITABLE MONTHS!

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

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. Contact me at mparnos@optioninvestor.com. 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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