Imagine waking up each morning, walking from the bedroom to the kitchen, and there's someone watching you. No, it's not your 22-year-old Hooter's girl wife (come on, you're still dreaming, wake up!). It's the intense glaze of Alan Greenspan watching your every step. You are the one who just paid over $150,000 on an Ebay auction for a farewell painting of Greenspan.
If you missed the auction, and have an uncontrollable (and unfathomable) urge, never fear. Go to Ebay, search for "Greenspan." You'll find multiple active auctions. You can have Alan hanging around your house in watching every basis point of your personal inflation or deflation.
When you pay $150,000 for a painting, you HAVE to find a place to hang it and the bathroom wall is too small. Hmmmm . . maybe the garage. Well, some folks have an extra $150,000 lying around. It wasn't a total loss. I understand that the money went to charity. Sure doesn't raise MY interest rate, though.
Stop Losses vs. Puts
It's a relatively simple answer, but it warrants review. Why? Because it can save you a fortune!
Here's the premise. You own 1,000 shares of XYZ stock and your cost is $47.00/share. Why do you own a stock? God only knows, but that a subject for another column. For whatever reason, you own 1,000 shares and you now have $47,000 (the full price of the stock) at risk. The question now becomes, how do you protect that investment? There are a few alternatives.
Choice #1 -- Protect my investment? Gee, XYZ is going up, why do I have to protect it?
Well, I have some swamp land I'd like to sell this guy. He's one bad announcement away from eating his next Christmas meal at a soup kitchen.
Choice #2 -- Gee, I'll just put in a stop order on XYZ at $44. That way, the most I can lose is $3/share or $3,000.
Wanna bet? What would happen if Al Queda terrorists kidnap Bill & Hillary? Hmmm . . . bad example. The market might go up. What if there was an announcement that the XYZ CEO cooked the books? The next morning, XYZ could open at $35 and you'd be staring at a potential loss of $12,000.
Here is how a stop loss order works. As soon as XYZ trades at, or below, $44, the order becomes a market order. The order fills immediately at the current ask. That's fine if XYZ moves down in an orderly fashion. However, if XYZ gaps open at $35, the order gets filled at $35, and you can kiss $12,000 goodbye.
Choice #3 -- Let's buy a five-month $45 insurance put for $4.00. Now, for the next five months, your $47,000 investment in XYZ is protected from $45 all the way down to zero. You can look at the difference between $47 (your cost basis for XYZ) and $45 (put strike price) as your deductible. The cost for your catastrophic loss protection is about $.80 per month.
So, there it is. Do you want to buy some swamp land? Would you rather have an almost unlimited downside risk? Or would you like to protect such a substantial investment? Since you decided to buy stock and become a directional trader, I don't really expect a rational answer, but there IS a "right" way to do it.
By the way, this same concept also applies to those who buy deep in the money LEAPS as a substitute for stock. Your total exposure might be less, but the investment still needs to be protected.
Three Vampires Walk Into a Bar
VEGAS SEMINAR = SOLD OUT!!!
1 WEEK TO LAS VEGAS
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. WATCH FOR THE ANNOUNCEMENT OF NEW CPTI SPRING SEMINAR DATES.
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 of upcoming seminars and contact you to go over your questions. The seminars are both fun and informative. Contact me today: Contact Support.
CPTI CURRENT FEBRUARY POSITIONS
CPTI February Position #2 - RUT Iron Condor - 717.13
CPTI CURRENT MARCH POSITIONS
CPTI March Position #2 - RUT Iron Condor - 717.13
CPTI March Position #3 - SPX Iron Condor - 1266.99
Our total net credit is $1.55 ($1,550). Our maximum profit range is 1190 to 1320 - a 140 point range. The maintenance is $15,000 (IF you have the right broker).
CPTI March Position #4 (Formerly Feb. Position) - SPX "Sure Thing" Credit Spread - 1263.78
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 - 1266.99
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)
QQQ ITM Strangle - $40.96
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.
UPCOMING CPTI 2-DAY
Our next CPTI seminar will be 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 email@example.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!
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 firstname.lastname@example.org. 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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