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A QUICK LOOK AT SOME QUICKIES

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A QUICK LOOK AT QUICKIES

It's Quickie time again. We're, at least for now, going to stick with the last week of the cycle quickies. The market spiked up today out of consolidation. It's trending more than it is in a specific range. A word to the wise -- our quickies are based on a range-bound market. This may not be the best time to establish these quickie positions. That being said, here are a couple of quickie possibilities for those who dare. These are both European style options. Their last day of trading is Thursday and traders are subject to the Friday morning open as the settlement prices.

November QUICKIE #1 - RUT Iron Condor - 664.93
Sell 10 Nov. RUT 670 calls
Buy 10 Nov. RUT 690 calls
Credit of about $3.35 ($3,350)

Sell 10 Nov. RUT 660 puts
Buy 10 Nov. RUT 640 puts
Credit of about $3.85 ($3,850)

Total net credit and profit potential of about $7,200. We're going to treat this the same way we'd treat a Siamese Condor. We've established a maximum profit range of 660 to 670, but we've also taken in a lot of premium. Our profit range is 652.80 to 677.20. These are also the exit points. The maintenance is $20,000 (IF you have the right broker).

An Alternative
With the RUT at about 665, I was tempted to suggest a Siamese Condor with a slightly upward bias. It looks like the market may continue up. So, we could actually sell the 670 puts and calls and buy the 690 calls and 650 puts. This would bring in about $10.80 and establish a range of 659.20 to 680.80. The only problem is that, if the market swings back down, we'd be stopped out of the trade with only a six point downward move.

The potential profit is higher, but this "alternative" changes us from being non-directional traders to slightly directional traders.

November QUICKIE #2 - SPX Iron Condor - 1230.96
Sell 10 Nov. SPX 1245 calls
Buy 10 Nov. SPX 1255 calls
Credit of about $.80 ($800)

Sell 10 Nov. SPX 1215 puts
Buy 10 Nov. SPX 1205 puts
Credit of about $.70 ($700)

Total net credit and profit potential of $1.50 ($1,500). The maximum profit range is 1215 to 1245. Maintenance is $10,000.

Reminders
These "Quickie" trades are not official CPTI portfolio trades. These are posted for advanced self-disciplined traders who can keep a close watch on the markets. Prices are based on Thursday's close and include some negotiation with the market makers. On Friday morning, the prices will likely be different. Be careful.

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Are We Getting Nervous Yet?
Our 1235/1245 bear call spread is being threatened. If you want to close your position at this point, it would cost you about $3.50. Then subtract the premium you took in (about $1.25) and you have $2.25. Multiply that by the number of contracts and you'll have a good estimate about what kind of loss you're facing.

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OOPS!
In the recently posted December CPTI RUT Iron Condor, I mistakenly typed 720/730 puts when they should have been calls. Most of you caught it and knew what I meant. A few dozen of you kindly brought it to my attention. CPTI students, it's up to you to keep me on my toes -- and I thank you.

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CPTI CURRENT NOVEMBER POSITIONS
CPTI November Position #1 - SPX Iron Condor - 1230.96
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 - 664.93
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 - 1230.96
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 - 1230.96
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 is 1150 to 1285. Maintenance is $18,000.

CPTI December Position #2 - RUT Iron Condor - 1230.96
With the RUT trading at about 658, we sold 15 Dec. RUT 590 puts and bought 15 Dec. RUT 580 puts for a credit of about $.60 ($900). Then we sold 15 Dec. RUT 720 calls and bought 15 Dec. RUT 730 calls for a credit of about $.55 ($825). Our total credit and profit potential is $1.15 ($1,725). The maximum profit range is 590 to 720. Maintenance is $15,000.

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ONGOING STRATEGIES
ZERO-PLUS Strategy - September SPX Iron Condor - 1230.96
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 - $40.60
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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