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SETTLEMENT APPROACHES “ ARE YOU READY?

HAVING TROUBLE PRINTING?
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SETTLEMENT APPROACHES - ARE YOU READY?

It's that time of the month - the often sleepless Thursday night preceding the Friday morning settlement of the European style index options. For many there's a lot at stake.

In our CPTI portfolio, we closed our two positions when it looked like the market was going to continue its march higher. But many CPTI students did not agree and are still short the December 1285 SPX calls and short the December 710 RUT calls. Are they in danger? What's the chance of a huge gap up?

The SPX closed Thursday at 1270.94. The short strike is 1285. The SPX settlement would have to gap up over 14 points before there's a problem. What would you do? The cost to buy back the 1285 call was $.20. You might have been able to buy it back for $.15. What are you willing to pay for peace of mind?

The RUT closed Thursday at 684.74. The short strike is 710. The cost to buy back the 710 was only a nickel. Should you bother buying it back with a 25+ point cushion? Probably not at this level - unless you're with one of the antiquated brokerage firms and want to release some margin for trading.

SPX Settlement Symbol = $SET
RUT Settlement Symbol = $RUT

Early & Efficient Use Of Maintenance
Here's another instance where having the right broker can make a difference in your trading. Let's say you're short the 1285 December call and the settlement price comes out as 1270 about noon. Most brokerage firms will tell you that the SPX is cash settled and that the settlement will be reflected in your account on Monday.

What about Friday afternoon? Even though the settlement has been resolved, your margin money is still tied up until Monday - at some brokers. Other more progressive brokers, however, will (if you ask nicely), allow you to use those very same maintenance dollars for new trades - on Friday afternoon. It's not automatic, you have to make the call.

What do you gain? If you find an appealing trade, you can gain the amount of premium that will have eroded over the weekend. Maybe it's a nickel. Maybe it's a dime. Whatever it is, the money is better off in your pocket than having eroded into oblivion.

Sometimes, expiration Friday will be quite volatile - more than a typical trading day. What does that additional volatility mean? It means potentially more premium to be had on that Friday afternoon.

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DO YOU HAVE WHAT IT TAKES TO PROFIT IN 2006?
TWO NEW CPTI 2-DAY ADVANCED SEMINAR DATES ANNOUNCED

It's that time of year. Don't give yourself a wallet. Give yourself the gift that will teach you how to fill your wallet. It's a gift of knowledge that will last a lifetime. Attend a CPTI seminar and learn strategies that work -- over and over and over again!! I'll teach you how making money can be boring -- and profitable. I'm booking reservations every day. Don't wait too long!

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 personally call you to go over your questions. The seminars are both fun and informative. Contact me today: mparnos@optioninvestor.com.

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CPTI CURRENT DECEMBER POSITIONS
CPTI December Position #1 - SPX Iron Condor - 1270.94
We sold 12 December SPX 1150 puts and bought 12 Dec. SPX 1135 puts for a credit of $.80 ($960). Then we sold 12 December SPX 1285 calls and bought 12 Dec. SPX 1300 calls for a credit of $.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. Closed out at $1.75 ($2,100). Loss of $420

CPTI December Position #2 - RUT Iron Condor - 684.74
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 $.60 ($900). Then we sold 15 Dec. RUT 720 calls and bought 15 Dec. RUT 730 calls for a credit of $.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. Closed out at $.70 (1,050). Profit of $675.

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CPTI CURRENT JANUARY POSITIONS

CPTI January Position #1 - RUT Iron Condor - 684.74
We sold 15 Jan. RUT 620 puts and bought 15 Jan. RUT 610 puts for a credit of $.65 ($900). Then we sold 15 January RUT 740 calls and bought 15 RUT January 750 calls for a credit of $.55 ($825). Total premium and profit potential is $1,725. Our maintenance is $15,000.

CPTI January Position #2 - OEX Bull Put Spread - 580.85
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.

CPTI January Position #3 -- SPX Iron Condor - 1270.94
We sold 15 SPX January 1200 puts and bought 15 SPX January 1190 puts for a credit of $.60 ($900). Then we sold 15 SPX January 1320 calls and bought 15 SPX January 1330 calls for $.65 ($975). Total premium and profit potential of $1,875. Maintenance is $15,000.

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ONGOING STRATEGIES
ZERO-PLUS Strategy - January RUT Iron Condor - 684.74
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.

Current 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 - $41.97
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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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 Saturday & Sunday, 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.

The recent Denver CPTI Seminar was a great success (no surprise, 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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