Option Investor
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REVIEWING THE OEX TRADE

HAVING TROUBLE PRINTING?
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Looks like we might be in for another exciting month on the CPTI couch. Just when it seemed like the market was coming back down to earth, it had a monster of a day. We still have about a 20-point cushion on both of our December positions. There are about two weeks left to December expiration. Keep the Tums handy.

Moving Right Along
Yesterday I posted another trade for our January CPTI portfolio. It was a 545/535 bull-put spread on the OEX. I watched the volume as contracts traded, and traded, and traded. Before all was said and done, almost 600 contracts traded. And, everyone got filled at $.50. Doing the math, that means that CPTI followers pocketed about $30,000 of premium.

Within a half hour of Wednesday's email blast, I received an email. That's not unusual. I get 20 emails a day. But, it's like deja vu. Each time I propose a trade, I can count on at least one email like this:

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Mike,

Is there an error in this posting? Checked OEX option prices for the Jan 535/545 put spread and the credit premium is .15 vs. the .50 posted. OEX at 577.77 at the time I checked vs. 577.75 for the posting. Don't see how this will increase to .50 without getting much closer to the strike prices. Can get .50 for a FEB 540/530 put spread, but not Jan. Thanks, H

Dear H,

There's no error. The posted prices are only the beginning of the game. We get most of our premium from negotiating between the bid/ask spreads. You should read past CPTI columns and give serious consideration to attending one of my CPTI seminars and you'll learn all about it. We spend hours going over this strategy and many examples. Regards, Mike

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How Did I Find This Trade?
With the market trading at about 577.75, I looked at the OEX daily chart. It didn't take a long distance call to Fibonacci or putting fresh batteries into an Oscillator to see that there is some damn good support at the 545 level. Next, I checked out the option chain -- and, amazing as it may seem, there are options at the 545 level.

First, I explored the possibility of a five point spread 545/540. Then I looked at different strike price combinations and premiums. I checked, and calculated, market maker positions and the bid and ask sizes of the various strike prices. All of these calculations can be done in a matter of minutes. They have to be, because, as the market moves, they all change.

I finally settled on the 545/535 OEX bull put spread. As "H" said in his email, the posted available premium was only $.15. I looked over the figures and approximated the credit I thought I could get and threw an order out there. Surprise, surprise. About 10 minutes later, I was filled.

In life, you don't get anything unless you ask for it. The same holds true in the options market. If it's within reason, ask!! I emphasize "within reason." If you're going to be greedy, you're just wasting your time. Remember, it doesn't cost anything to put orders out there. You can't make any shots you don't take.

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TWO NEW CPTI 2-DAY ADVANCED SEMINAR DATES ANNOUNCED
My last seminar was in October in Denver. I've received a lot of emails about new dates for my advanced seminar. Allowing time for CPTI students to enjoy the holiday season, I've come up with two dates and locations.

Email me for information -- but only if you're a SERIOUS trader who wants to learn. I'm here for you. I'll be glad to send you all the details and call you to go over your questions. The seminars are both fun and informative. See below for my contact information.

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CPTI CURRENT DECEMBER POSITIONS
CPTI December Position #1 - SPX Iron Condor - 1264.67
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 - 690.21
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 - 690.21
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.

CPTI January Position #2 - OEX Bull Put Spread - 580.22
With the OEX trading at about 577.75, we sold 15 OEX January 545 puts and bought 15 OEX January 535 puts for a credit of $.50 ($750). Maintenance is $15,000.

We're going to be waiting for an 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 Iron Condor - 690.21
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 - $42.01
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.

Based on current figures, the new total 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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NEW DATES FOR CPTI 2-DAY ADVANCED SEMINARS -
February 4 & 5 - Atlanta, GA
February 18 & 19 - Las Vegas, NV

Our next CPTI seminars will be on Saturday & Sunday, February 4th & 5th in Atlanta and February 18th & 19th in Las Vegas.

Our CPTI seminars are limited to ONLY 25 ATTENDEES. If you're a serious options trader and you want to learn the nuances of our advanced non-directional trading strategies and hone your trading skills, contact me ASAP at mparnos@optioninvestor.com. I'll send you all the pertinent information. The price is right -- $995.00 -- less than the profit from one Iron Condor trade -- and you'll have a two-day experience that you'll remember, and profit from, for a lifetime.

Our latest Denver CPTI Seminar was a great success (actually, they all are). There are now 25 more enlightened minds, with smiles attached, ready to generate a healthy annual return using our CPTI strategies. Remember, if you attend one of my CPTI seminars, you are entitled to RETAKE the seminar a second time at NO CHARGE!

33 OUT OF 36 PROFITABLE MONTHS!

WANT TO ACHIEVE SUCCESS WITHOUT STRESS?
OF COURSE YOU DO!!

USE OUR CPTI WEALTH-BUILDING TECHNIQUES!

You should really try and make one of these seminars, if you can. With what you learn, you'll see a substantial increase in your trading results. Contact me at mparnos@optioninvestor.com. If you've already signed up, I'll see you there. If you haven't signed up, what are you waiting for?

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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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