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IMAGINE THAT!

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We are creatures of habit. Once we establish patterns, they can last a lifetime. It takes a lot to break those patterns. As we know, much of the trading process is psychological. These patterns/habits are merely comfort zones for us. It's not often that we venture beyond our comfort zones. Venturing outside -- or even the thought of it -- causes stress, anxiety and just an old fashioned fear. That's why it's so difficult to pull the trigger when it comes to closing out a trade -- primarily when taking a loss.

It takes a combination of guts and self-discipline to do something different. One of the methods we discuss at the CPTI seminars is the use of imagery. It's based on the relatively simple premise that the more times we repeat a behavior, the more comfortable it becomes.

Here's the cool part about using imagery. The repetition of the new behavior does not necessarily have to be in real life. It can be in your imagination. We hate to interrupt your fantasy life, but you'll have to put aside your dreams (only temporarily) of winning the lottery or being intimate with a human Barbie Doll.

Let Your Imagination Loose
Now, sit back, close your eyes. Take a deep breath, because it's not going to be easy. Imagine you have the SPX 1160/1150 bull put spread. The market has been moving down steadily for the last week. The SPX is trading at 1165, 1162, 1160. It has broken through a support level, maybe two or three. If you close out the trade now, it will only cost you $1,500 over and above the premium you took in. It's time to make your move. You've made the calculations. You've already input the symbols into your computer. All you have to do is click on "place trade." You take a deep breath and "CLICK." A moment later you get filled.

It's over. The cloud that was hovering over your head is gone. You can breathe again. You no longer have to worry about that position. Your plate is clean and you can now start fresh. Experience the relief. You've done the prudent thing by cutting short a potential large loss. You'll live to trade another day.

OK. Back to reality. You experienced both the uncomfortableness of watching the trade move against you and the relief of putting it behind you. You felt the inner strength necessary to pull the trigger and take the loss. Then, you felt the relief -- the gratification for your actions. Repeat this process, real or imaginary, over and over again. If you have a good broker, they will have a "virtual trading" feature. This is a convenient way to physically go through the process.

Athletes often use visualization to enhance their on-the-field performance and to break bad habits. The more you use your mind to imagine doing something unfamiliar to you, the easier it will be to perform the act when the time comes in real life. It won't have much of an affect on your lottery fantasy and it likely won't help you find a real-life Barbie, but it could really help your trading.

Consider attending my CPTI 2-day advance seminar (see below). We discuss the psychological aspects of trading and a lot more!!

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SEPTEMBER POSITIONS
CPTI SEPTEMBER Position #1 -- SPX Iron Condor - 1218.02
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 - 663.33
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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CPTI OCTOBER POSITIONS
CPTI October Position #1 - SPX Iron Condor - 1218.02
We sold 15 SPX October 1280 calls and bought 15 SPX October 1290 calls for a credit of about $.60 ($900). On Friday we sold 15 SPX October 1160 puts and bought 15 SPX October 1150 puts for a credit of about $.60 ($900). We now have a complete Iron Condor with a trading range of 1160 to 1280. Our total potential profit is $1,800. There should be no additional maintenance required above the $15,000 that's being held for our bear call spread (IF you have the right broker).

CPTI October Position #2 - OEX Iron Condor - 563.17
With the OEX at about 559, we sold 15 OEX October 590 calls and bought 15 OEX October 600 calls for a credit of about $.55 ($825). Then we sold 15 OEX October 525 puts and bought 15 OEX October 515 puts for a 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.

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ONGOING STRATEGIES
ZERO-PLUS Strategy - September SPX Iron Condor - 1218.02
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.

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QQQ ITM Strangle - $38.77
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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CPTI SEMINAR DATE!!
CPTI SEMINAR DATE -- DENVER, CO - OCT. 15/16
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.

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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