Option Investor
Updates

WHERE DO THE PROFITS GO?

HAVING TROUBLE PRINTING?
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What are you going to do with all the money you make trading? Some CPTI students use the profits to live on. Others have different objectives, most want to retire. It's certainly a reasonable objective. But, what some students don't realize, is that there is a learning curve. Some expect to read a few columns, put on a few trades, and immediately be successful.

That will happen often - simply because of the high percentage of profitability of our trades. But, if you don't understand the strategies, it will eventually come back to bite you in the butt. Initial success for beginners is a mixed blessing -- because it doesn't necessarily mean you know what you're doing. If you raise you hand in front of a monkey, the monkey will raise his hand too. But he doesn't know why he's doing it. He probably won't lower his hand, until you do. Short term success for beginning CPTI students, isn't indicative of knowledge. Knowledge will not only increase your chance of success, but it will improve your return from negotiating and money management techniques.

Is It Better To Be Lucky Than Good?
Remember, during the "irrational exuberance" bull-market era, when the Wall Street Journal would have their contest? They would pit dart throwing monkeys against professional financial analysts in a stock picking competition. Needless to say, the monkeys won a surprising number of times - simply by throwing darts at the stock pages. Perhaps that means we shouldn't under-estimate monkeys. I'd prefer to think, though, that it is confirmation that the markets are simply organized chaos. And, that is precisely why we, at the CPTI, prefer not to try and pick directions.

The typical demographic of those serious traders who attend my CPTI seminars is pure baby-boomer - men, over 45, who have acquired a respectable amount of money over the years. As you know, the CPTI strategies require a certain amount of assets in one's brokerage account to satisfy maintenance requirements. I get many emails from traders with only $5,000 or $10,000 in their accounts who want to trade CPTI strategies. It's possible, but being undercapitalized really limits one's trading flexibility.

I've noticed recently that a lot more women are signing up for my seminars. A few husband-and-wife tandems have attended. That's encouraging - and productive. Trading is a lonely business. But, trading is mentally stimulating and is a great thing for a couple to share. Couples that trade together, ____________ together.

What Will We Do With Our Profits?
According to a recent baby-boomer study, "more than 50% of homeowners ages 45 to 54, and nearly 60% of the homeowners ages 55 to 64 are either 'likely' or 'very likely' to buy a vacation, investment or new primary home sometime in the coming 60 months." Well, that information alone should let us know there will not be a real estate collapse in the foreseeable future.

How will you, or do you, spend your profits? If you have a preference or a story you'd like to share, send it along.

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Getting Nervous Yet?
Many of you have noticed that the RUT (Russell 2000 Index) has been moving up a little too fast for our tastes. It closed at about 732 and our February bear call spread is 750/760. Our cushion is only about 18 points.

What should you be thinking about? If you closed out the spread (based on Friday's closing numbers), it would about $2.10. If you took in $1.00 when you opened the position, you'd have a loss of about $1.10 per contract.

There are still three weeks left in the February option cycle. Is the market going to continue up? Is it going to pause? Reverse? How much risk are you willing to take? Everyone will have a different take on the situation. There is no one formula or choice that will be appropriate for everyone.

Personally, I probably have a slightly higher risk tolerance that some traders. The RUT has run up very far very fast. I'm going to give it another 5-10 points to see if it's going to run out of steam. It's making all time new highs. Where it will stop, nobody knows. But, remember, you have to make your own decisions based on your own risk tolerance and account size.

Also, just because you may decide to close the RUT position, it doesn't mean you have to roll to another position immediately. It also doesn't mean you have to establish a new RUT position. Don't carry a grudge. If a position goes bad, look for opportunities in other indexes, etc.

Also, if you decide to close the bear call spread, you may want to close the bull put spread too - if you need to free up maintenance dollars.

Good luck and trade smart!!

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ONLY 1 WEEK TO ATLANTA - SUPERBOWL SEMINAR
ONLY 3 WEEKS TO LAS VEGAS
That Extra Bit Of Knowledge Can Make A Huge Difference!!

Want to learn how to get those extra nickels and dimes on your spread trades? They really add up. Come join me in Atlanta for two days of information and fun. It seems like most people have signed up for Vegas. There are still spots open in Atlanta and only a few left in Vegas. Don't put it off!! It's an investment in your future. They say that money can't buy love. Wouldn't you like to see for yourself?

We won't miss a minute of the Super Bowl. We'll be having our own Super Bowl party!!

There are profits waiting for you out there. But you have to make the effort. Give yourself the gift that will teach you how to fill your wallet. It's a gift 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 daily. Don't wait too long! Vegas spots are going fast!

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 contact you to go over your questions. The seminars are both fun and informative. Contact me today: Contact Support.

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CPTI CURRENT FEBRUARY POSITIONS
CPTI February Position #1 - SPX "Sure Thing" Credit Spread - 1283.72
We originally sold 2 February SPX 1275 calls and bought 2 February 1300 calls for a net credit of about $7.40 ($1,480). The initial maintenance requirement was $5,000. Our profit potential was $1,480. When the market started back up, we reversed our position and put on four contracts of the 1280/1255 bull put spread. Our current adjusted profit potential is $1,420 and the new maintenance is $10,000. Now, we can root for the SPX to close above 1280.

CPTI February Position #2 - SPX Iron Condor - 1283.72
We sold 10 February SPX 1175 puts and bought 10 February SPX 1160 puts for a credit of $.80 ($800). Then we sold 10 February SPX 1325 calls and bought 10 February SPX 1340 calls for a credit of about $.65 ($650). Our total net credit and profit potential of about $1.45 ($1,450). Maximum profit range is 1175 to 1320 = 150 points. Maintenance requirement is $15,000 (IF you have the right broker).

CPTI February Position #3 - RUT Iron Condor - 732.22
We sold 15 February RUT 640 puts and bought 15 February RUT 630 puts for a credit of $.50 ($750). Then we sold 15 February RUT 750 calls and bought 15 February RUT 760 calls for a credit of $.50 ($750). Our total net credit and profit potential of $1.00 ($1,500). Maximum profit range is 640 to 750 = 110 points. Maintenance requirement is $15,000 (IF you have the right broker).

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CPTI March Position #1 - SPX Iron Condor - 1283.72
We sold 10 SPX March 1340 calls and bought 10 SPX March 1355 calls for a credit of $.85 ($850). Then we sold 10 contracts of SPX March 1190 puts and bought 10 contracts of SPX March 1175 puts for a credit of $.90 ($900)

Our total net credit and profit potential is $1.75 ($1,750). Our maximum profit range is 1190 all the way up to 1340 (150 Points!!). The maintenance is $15,000 (IF you have the right broker).

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ONGOING STRATEGIES
ZERO-PLUS Strategy
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.

With the successful RUT position generating $2,200, our new cash position is $38,450 ($36,250 + $2,200).

Current Zero Plus Position: March SPX Iron Condor - 1283.72
On Friday, we entered the same SPX Iron Condor for our Zero Plus position that we put on in our first CPTI March portfolio position. However, we did an extra few contracts.

We sold 12 SPX March 1340 calls and bought 12 SPX March 1355 calls for a credit of $.85 ($1,020). Then we sold 12 contracts of SPX March 1190 puts and bought 12 contracts of SPX March 1175 puts for a credit of $.90 ($1,080)

Our total net credit and profit potential is $1.75 ($2,100). The maintenance is $18,000.

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QQQ ITM Strangle - $42.11
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 January expiration, with the QQQQs, we rolled our short January $37 calls to the short February $37 calls.

The total of generated premium (through the January cycle) is still $5,950. We currently are short the February $37 calls. We have no short put position at this time.

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UPCOMING DATES FOR CPTI 2-DAY
ADVANCED SEMINARS -
February 4 & 5 - Atlanta, GA
February 18 & 19 - Las Vegas, NV

Our next CPTI seminar will be on Saturday & Sunday, February 4th & 5th in Atlanta and then on 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 - ONLY $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!

35 OUT OF 38 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 (though many often do) 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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