Option Investor
Updates

BUT CAN THEY WALK THE WALK?

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A few years ago, I sent emails to five well-known "option gurus" - those considered by many and self-proclaimed to be expert traders and teachers. I proposed a simple challenge. I figured, let's see who can really walk the walk and not just talk the talk. Sometimes people have to step up and put their money where their mouths are. Talk is cheap. Let's see who would be willing to back it up.

I suggested each "guru" take $100,000 on January 1st and put it into a brokerage account. We would all then spend the next approximately 12 months putting our strategies to work - out there for whole world to see. At option expiration the following January, we'd add up the marbles and see who wins. It's simple.

What a great promotion that would have been. All participants would have received extensive publicity on their own sites and the sites of other participants. The various option and trading publications would have likely posted the up-to-date results every month. I bet IBD and the Wall Street Journal would have covered it as well. It would have been both exciting, fun and a challenge. Who knows, it might have turned into an Olympic event.

Do You Like Your Gurus Regular or Extra-Crispy?
What happened? It was unanimous. Nothing happened. I received no response from any of the "gurus." I wasn't surprised. Colonel Sanders would be serving these guys up as part of a three-piece meal with very little white meat.

In a way, it's understandable. These guys aren't dummies. What if they lose? If there are five participants, there are going to be four losers. When it comes to one's image, coming close "ain't gonna cut it." Coming close is great in horseshoes and hand grenades, but that's about all.

High profile participants would have a lot more to lose than they would to gain. So, why would they risk it? These guys have multi-million dollar corporations with their public relations machines depending on their image of being experts. How would it look if they got their financial butts kicked by the CPTI? Their credibility would take a serious blow - as would their subscriber numbers and their seminar attendance figures.

I may try again - and maybe, this time, the gurus will take me up on my challenge. Maybe they've grown some cohones over the last two years. Maybe they're ready to put their financial family jewels and their images on the line. I won't hold my breath, though. You can't wash the spots off a leopard. We'll see how option students outside the CPTI like a little chicken with their option picks. I'll keep you posted.

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First Impression Of The Quickies
I took my first look at the new SPX and OEX Weeklys (quickies). The first thing I checked was how many strike prices are available to trade. That might be a problem for us. With the SPX at about 1180 on Friday morning, the only strike prices available to trade were 1165, 1175, 1185, 1195, 1205. If there are only going to be strikes at and near the money, we will have a hard time using our strategies. Plus, the first bunch of strikes seem to be in 10 point increments. That reduces the flexibility in creating trades.

Now, with the big 19+ upward move on Friday, will they open up additional upside "weeklys" strikes on Monday? Or, will we be limited to the original strikes opened on Friday?

We may have to wait a while as they work the kinks out of the new system. The Weeklys may eventually be a lot of fun - or they might just end up making for longer option chains. Time will tell.

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CPTI CURRENT NOVEMBER POSITIONS
CPTI November Position #1 - SPX Iron Condor - 1198.41
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 - 635.33
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 - 1198.41
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).

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ONGOING STRATEGIES
ZERO-PLUS Strategy - September SPX Iron Condor - 1198.41
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.

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QQQ ITM Strangle - $38.32
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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