Option Investor
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A DAY FOR GIVING THANKS

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We don't realize how good we have it. I mentioned that before after I returned from my first trip to the Philippines. Most there have relatively little. They work hard for what they have. They appreciate everything. That's how I want to be when I grow up.

Here, people complain if it rains. They complain if there's traffic. They complain if their steak is too well done. They complain if their new car gets 18 miles per gallon instead of 20. They complain when their favorite program has been pre-empted by a Flinstones marathon. It seems that, in America, complaining has supplanted baseball as the national pastime.

It's a shame. There is so much to be thankful for. Be thankful for your loved ones. Be thankful for your good health. Be thankful for that turkey you're about to demolish. Be thankful that you can afford to pay the heating bill. Be thankful that you closed your SPX 1235/1245 position early last month. Be thankful you're not a Detroit Lions fan. It goes on and on.

Remember, there's beauty in everything, but not everyone can see it. Be thankful for the beauty you can see -- and strive to see and appreciate the rest.

Personally, I'm thankful for all CPTI students and subscribers. I'm thankful for all the new friends I've made of those who have attended my CPTI seminars. I'm thankful that you have the desire to learn. I'm thankful that you take the concepts that we use and find trades where I never would have thought to look. I'm thankful for the emails I receive from you, telling me of your successes. I'm thankful for the emails telling me about your children have graduated, are getting married, or are giving you another grandchild.

I'm a lucky man. Unfortunately, though, I'm a Detroit Lions fan. I guess we can't have everything. Oh well, pass the turkey . . .

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JANUARY IS OPEN FOR BUSINESS
On Wednesday, we put on our first January position. It was too good to resist. There's good support at 620 -- and it's about 65 points away. I'll sleep well with this bull put spread. Now, we need to focus on a bear call spread for January. Look at the option chain. There are a couple of possibilities. I'm looking at the January 740/750 bear call spread and the 750/760 bear call spread.

On Wednesday, in our Zero Plus Ongoing Strategy, I threw out an order for a credit limit of $.45 on the January 750/760 RUT bear call spread. After about 15 minutes, and a momentary move up, it was filled. That is the bear call spread I would prefer. I still anticipate further upward movement, so I'm waiting to put the bear call spread on our CPTI portfolio.

If there is a spike up, we may be able to get $.60 for the 750/760 bear call spread. If not, I have no problem accepting less. Slightly more aggressive traders can look at the 740/750 bear call spread. Using Wednesday's closing prices, it seems we can get about $.50. With a spike up, that might increase to $.70.

One thing I noticed on Wednesday -- by going out to January, the RUT market makers are a little more receptive to some negotiation. As we have experienced in the past, we often cannot even negotiate a nickel from the front month options. We got about a dime's worth of negotiation on the January fills. Maybe that's something else to be thankful for today.

Why does there appear to be a heftier premium in the January options? It's probably due, to some extent, that January is a five-week option cycle. So, we're going to have to be patient, but it should be worth our while -- both profit-wise and safety-wise.

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DECEMBER POSITION UPDATE
The market has been moving up, but it seems to be running out of steam. Let's hope so because we're only about 20 points away from our short 1285 strike price on our SPX bear call spread. Last November things got out of control to the upside. We're going to keep an eye on our position. As we experienced last month, we can still be profitable -- even if we have to close a position.

Also, just because I've already selected a January position doesn't mean I'm not still looking for potential December positions.

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SOME OLDIES BUT GOODIES
What do attorneys use for birth control? -- Their personalities.
What's the difference between a girlfriend and wife? -- 45 lbs.
What's the difference between a boyfriend and husband? -- 45 minutes.
What's the difference between a new husband and a new dog? -- After a year, the dog! is still excited to see you.
What's the difference between Beer Nuts and Deer Nuts? -- Beer Nuts are $1, and Deer Nuts are always under a buck.
Why does Mike Tyson cry during sex? -- Mace will do that to you

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CPTI CURRENT DECEMBER POSITIONS
CPTI December Position #1 - SPX Iron Condor - 1265.61
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 - 683.14
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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CPTI CURRENT JANUARY POSITIONS
CPTI January Position #1 - RUT Bull Put Spread - 683.14
With the RUT trading at about 685, we sold 15 Jan. RUT 620 puts and bought 15 Jan. RUT 610 puts for a credit of about $.65 ($900). Our maintenance is $15,000.

We're going to be waiting for a good opportunity to put on the bear call spread to complete the Iron Condor. If we get the opportunity, great! If not, we'll be satisfied with just holding the bull put spread.

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ONGOING STRATEGIES
ZERO-PLUS Strategy - January RUT
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.

As we did in our CPTI portfolio account, we closed our 1235/1245 Nov. bear call spreads for a loss of $1,350. We deduct the $1,350 from our previous cash position of $37,600 to establish our new cash position of $36,250.

New Zero Plus Position:
With the RUT trading at about 685, we sold 20 Jan. RUT 620 puts and bought 20 Jan. RUT 610 puts for a credit of about $.65 ($1,300). Then we sold 20 Jan. RUT 750 calls and bought 20 of the Jan. RUT 760 calls for $.45 ($900). Our maintenance is $15,000. Our maximum profit range is 620 to 750. Our net credit and profit potential is $1.10 = $2,200.

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QQQ ITM Strangle - $41.80
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).

We currently are short the December $37 calls. We have no short put position at this time.

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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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