Option Investor
Updates

MY FAVORITE TIME OF THE MONTH

HAVING TROUBLE PRINTING?
Printer friendly version

The Sunday following expiration can be a really nice day. The sun doesn't even need to shine -- because it's raining dollars. And those dollars find their way into our pockets. We don't even have to get up off the couch. Isn't it amazing what can be done while sitting on a couch or a Lazy-Boy? At the CPTI we have our own version of PMS -- Profit Making Strategies. PMS can be painful at times, but normally, for us, it's a time for celebration.

The INDEX closing settlement prices were as follows:
SPX ($SET) = 1183.79 (Friday morning settlement - European style)
OEX ($OEX) = 544.50 (Friday EOD settlement - American style)
RUT ($RLS) = 627.45 (Friday morning settlement - European style)
The RUT settlement number wasn't available until very late on Friday. I've included it in the list above because I know a lot of CPTI students play the Russell 2000 every month.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

We're Not Done Yet For November
On Friday we added a third November position. I'm going to be on the lookout for a fourth -- if I can find something worthwhile. It looks like the market is trying to form a bottom. With more economic data scheduled for this week -- along with another Fed meeting on November 1, we might still see some volatility. But, at least this is only a four-week option cycle. October was a five week cycle -- seemed like a long wait to be able to record those profits.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

TRACKING CPTI PORTFOLIO RESULTS
Below is a summary of the October CPTI positions. Through the 12 months in tracking year number three, we're now $23,055 to the positive. We made $5,490 in September. Although we had a few rough months earlier, we're still nicely positive for the year. Onward and upward. We've now been profitable for 32 OUT OF THE LAST 35 months -- something we can be VERY proud of.

RECAP OF OCTOMBER POSITIONS
SPX Iron Condor - Profit: $1,800
OEX Iron Condor - Profit: $1,950
SPX Iron Condor - Profit: $1,740
TOTAL OCTOBER PROFIT: $5,490

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

OCTOBER QUICKIE RESULTS
For the second month in a row, our quickie positions were both profitable. Remember, these profits are not included in tracking our CPTI Portfolio.

The SPX 1165/1155 & 1205/1215 closed 100% profitable with $1,450 in profits.

The OEX settled at 544.50. That means our 10-contract OEX Siamese Condor returned a profit of $1,150. Remember, in a Siamese Condor, the closer the index settles to the short strike price (in this case 550), the more profit we make.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

ONGOING ZERO COUPON STRATEGY UPDATE
On Friday, we used the same SPX Iron Condor for our CPTI portfolio. See description below.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

S&P 500 (SPX) Support & Resistance
Below is a glimpse at the S&P from a technical analyst -- which I am not. Isn't it amazing how our trades work out just fine anyway? What does that tell you?

Support:
The 200 day SMA at 2073
2050-51 is price resistance from spring and summer 2005 consolidations
2018 is the early April high.
The August 2004/April 2005 up trend-line at 2018

S&P 500: Closed at 1179.59
Resistance:
The 200 day SMA at 1199
1200 was solid price support at one time
The 50 day EMA at 1207
1210 held in late September on the close.
The 50 day SMA at 1213
December 2004 high at 1219 and June high at 1220
March 2005 closing high at 1225 and intraday high at 1229.11
The September high at 1243 and the recent August high at 1246

Support:
1183 - 1184 from November 2004 highs and July 2005 intraday low and a high
way back in July 1998
1179.50 is the August 2003/August 2004 up trendline.
1165 - 1155 from late 2001/early 2002 double top

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

I'M A TRAVELIN' MAN - AGAIN
I'm on the road again for the next two weeks. Going back to make sure the Philippines are still there. I know what you're thinking. It's a long long trip. That's true. But what's waiting for me there is worth the trip. She sure is.

On my last trip I found a method that will enable me to access the internet more frequently. I'll be sending columns and updates regularly. They'll be coming, but it might not be exactly on Sundays and Thursdays. Keep an eye on your email.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

SUMMARY OF CPTI OCTOBER POSITIONS
CPTI October Position #1 - SPX Iron Condor - 1179.59
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 was $15,000. Profit: $1,800

CPTI October Position #2 - OEX Iron Condor - 544.50
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 was $15,000. Profit: $1,950

CPTI October Position #3 - SPX Iron Condor - 1179.59
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 was $18,000. Profit: $1,740

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

CPTI CURRENT NOVEMBER POSITIONS
CPTI November Position #1 - SPX Iron Condor - 1179.59
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 - 632.73
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.

CPTI November Position #3 - SPX Iron Condor - 1179.59
With the SPX trading at about 1180 on expiration Friday, we sold 15 November SPX 1120 puts and bought 15 November SPX 1110 puts for a credit of $.70 ($1,050). Then, we sold 15 SPX November 1235 calls and sold 15 SPX November 1245 calls for $.55 ($825). Our total credit and profit potential is $1.25 ($1,875). Maintenance is $15,000 (IF you have the right broker).

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

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: $34,700 + $2,900 (October Profit) = $37,600

For November we put on the same SPX Iron Condor as we did in the CPTI portfolio. With the SPX trading at about 1180 on expiration Friday, we sold 15 November SPX 1120 puts and bought 15 November SPX 1110 puts for a credit of $.70 ($1,050). Then, we sold 15 SPX November 1235 calls and sold 15 SPX November 1245 calls for $.55 ($825). Our total credit and profit potential is $1.25 ($1,875). Maintenance is $15,000.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

QQQ ITM Strangle - $38.55
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).

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

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

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

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

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

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.

Couch Potato Trader Updates Archives