Option Investor
Updates

X-MAS SHOPPING IN NOVEMBER

HAVING TROUBLE PRINTING?
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The market may have slowed down, but the uptrend may still have a way to go. Just a note to keep a close eye on your SPX 1235/1245 bear call spread and be ready to act if the market takes off again soon. On Friday, the market looked ready to pause, but the selling was not heavy and buyers came in at the end of the day to post a modest gain. That's a bullish scenario. Some of it might have been short covering, but there is currently a bullish sentiment. How long it lasts remains to be seen.

There are also some earnings reports and some economic numbers this week that might affect the market a bit. The next few weeks should be interesting.

Ready to do some Christmas shopping in November? The sales are starting. We still have a few maintenance dollars to spend. Below is what seems to be a good buy. Let's ring it up and hope we can keep it come December expiration.

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New December CPTI Position (#2)
Let's try to initiate our second December position with an Iron Condor on the RUT. I think we can create a substantial maximum trading range. I like our chances on this one. With the RUT trading at about 658, let's:

Sell 15 Dec. RUT 590 puts
Buy 15 Dec. RUT 580 puts
Credit of about $.60 ($900)

Sell 15 Dec. RUT 720 calls
Buy 15 Dec. RUT 730 calls
Credit of about $.55 ($825)

Total credit and profit potential of $1.15 ($1,725). Maximum profit range of 590 to 720. Maintenance is $15,000.

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CPTI CURRENT NOVEMBER POSITIONS
CPTI November Position #1 - SPX Iron Condor - 1220.14
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 - 658.16
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 - 1220.14
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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CPTI CURRENT DECEMBER POSITIONS
CPTI December Position #1 - SPX Iron Condor - 1220.14
With the SPX trading between 1217-1222, we sold 12 December SPX 1150 puts and bought 12 Dec. SPX 1135 puts for a credit of about $.80 ($960). Then we sold 12 December SPX 1285 calls and bought 12 Dec. SPX 1300 calls for a credit of about $.60 ($720). Total net credit and profit potential of about $1.40 ($1,680). Maximum profit range of 1150 to 1285. Maintenance is $18,000.

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ONGOING STRATEGIES
ZERO-PLUS Strategy - September SPX Iron Condor - 1220.14
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 - $40.08
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).

Our GTC order to buy back the November $37 puts for a nickel was filled. We are now only short the November $37 calls with about two weeks left in the November cycle.

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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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