Option Investor
Updates

MARKET ON A ROLLER COASTER

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The market has managed to get it up a few times in the last week -- but it can't keep it up for long. That's the beauty of non-directional trading. The market can, and likely will, remain in a state of flux. Let the masses continue to place their bets. Even when directional traders are staring at profits, they rarely have the self-discipline to take it.

This month we are about to record our 32nd month of profits out of the last 35. Unless something completely outrageous happens, all three of our positions will expire worthless and we will keep almost $5,600 of profit.

I'll be poking around tomorrow looking for another November trade or two. Watch your email.

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A Weekend Of Shared Knowledge
Last weekend was the Denver CPTI seminar. I had the pleasure of meeting some great people from Montana, Canada. Texas, Illinois, Michigan, North Carolina, Missouri, California, Indiana, Florida, Washington, and a large contingent from the Denver area. Word of the CPTI, and our success, is spreading in the trading community. Our OptionInvestor "Couch Potato Trader" subscriber base is growing. People from all over are now anxious to learn what this "non-directional stuff" is all about.

As part of every CPTI seminar, we take time to discuss, in detail, failed trades. Everyone has horror stories. But the question is whether the trader has learned from the experience. He lost the money, but did he keep the lesson? Nine out of ten confessors are directional traders who have seen the error of their ways. The tenth trader is usually a spread trader who put his credit spread too damn close. Why? Greed, plain and simple. They're all budding converts and want to learn how we do what we do. It's encouraging that they're taking this important step while there is still something left in their brokerage account.

I take my hat off to the whole bunch of them. It's their success stories, after the seminar, that make it all worthwhile.

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The QQQQ Rollout
A few days ago we rolled out our short October $37 puts and calls to the November $37 puts and calls for a net credit of $600.

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CPTI CURRENT OCTOBER POSITIONS
CPTI October Position #1 - SPX Iron Condor - 1177.80
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 have a complete Iron Condor with a trading range of 1160 to 1280. Our total potential profit is $1,800. Our maintenance requirement is $15,000.

CPTI October Position #2 - OEX Iron Condor - 545.13
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.

CPTI October Position #3 - SPX Iron Condor - 1177.80
With the SPX at about 1230, we sold 12 October SPX 1285 calls and bought 12 October SPX 1300 calls and received a credit of $.80 ($960). We had asked for $.75, but, our broker came back with an $.80 fill (bless his heart). Then, we sold 12 October SPX 1155 puts and bought 12 October SPX 1140 puts for a credit of $.65 ($780). Our total profit potential is $1,740. We have a maximum profit range of 1155 to 1285. Maintenance is $18,000.

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CPTI CURRENT NOVEMBER POSITIONS
CPTI November Position #1 - SPX Iron Condor - 1177.80
With the SPX trading at about 1215, we sold 12 SPX November 1140 puts and bought 12 SPX November 1130 puts for a credit of about $.80 ($960). Then, we sold 12 SPX November 1280 calls and bought 12 SPX November 1290 calls for a credit of about $60 ($720). Our total credit and profit potential is $1.40 ($1,680). Maintenance is $12,000 (if you have the right broker). Maximum profit range is 1140 to 1280.

CPTI November Position #2 - RUT Iron Condor - 627.54
With the RUT trading at about 665, we sold 12 November RUT 610 puts and bought 12 November 600 RUT puts for a credit of about $.60 ($720). Then, we sold 12 RUT November 720 calls and bought 12 RUT November 730 calls for a credit of $.65 ($780). Our total credit and profit potential is $1.25 ($1,500). Maintenance is $12,000 (IF you have the right broker). Maximum profit range is 610 to 720.

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ONGOING STRATEGIES
ZERO-PLUS Strategy - September SPX Iron Condor - 1177.80
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: $33,000 + $1,700 (September Profit) = $34,700

For October we duplicated the CPTI portfolio position by selling 20 October SPX 1155 puts and bought 20 1140 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. 1285 calls and bought 20 Sept. 1300 calls for a credit of $.80 ($1,600). Our total potential profit is $2,900. Our maximum profit range is now 1155 to 1285. Our maintenance is $30,000 (15-point spread X 20 contracts).

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QQQ ITM Strangle - $38.30
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.

Near October expiration, with the QQQQs trading near $38, we rolled our short October $37 puts and calls to the short November $37 puts and calls.

Based on these figures, the new total of generated premium (through the November cycle) is $5,950 ($5,350 plus the $600).

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CPTI 2-DAY ADVANCED SEMINARS -
WATCH THIS SPACE FOR NEW DATES -- TO BE ANNOUNCED SOON!

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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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