Option Investor
Updates

CLOSING OUT EARLY?

HAVING TROUBLE PRINTING?
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?Only four trading days left to expiration. The market had a strong up day on Friday. Plus it looks like Monday will be a follow through upside day -- at least for the opening. Our cushions are quite respectible. Our only position that might require an adjustment is the "sure thing" credit spread, but it will ultimately work itself out.

There are many CPTI students who, when it gets to the last week of the option cycle, look for opportunities to close out their trades early. There are a few purposes. 1) Eliminate your exposure and avoid the possibility of a major market event; 2) Avoid the scary Friday morning opening settlement; and 3) To release some maintenance capital for other purposes.

Here are some scenarios to consider. You need to look at these scenarious on your own on a regular basis during the option cycle. There are often some good opportunities to close a position and put those funds to use elsewhere.

CPTI March Position #1 - It would cost about a nickel or dime (at the most) to close out the 1340 call. There's no need to worry about the 1355 call. At this point, it has no value whatsoever. You should be able to unwind the 1190/1175 bull put spread for about $.30. The total might be $.40 ($400) to be totally out of the position.

CPTI March Position #2 - It would cost about a nickel to buy back the 660 put and another nickel for the 790 call. A total of a dime and you're out and your money is free. Not a bad deal if you have something else in mind for your maintenance bucks.

CPTI March Position #3 - It would cost about $.15 to unwind your 1325/1340 bear call spread and maybe $.30 for the bull put spread -- a total of $.45.

We'll keep an eye on our positions and still be on the lookout for additional April positions.

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CPTI CURRENT MARCH POSITIONS
CPTI March Position #1 - SPX Iron Condor - 1281.58
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).

CPTI March Position #2 - RUT Iron Condor - 726.34
On Wednesday 2/1, we sold 15 March RUT 660 puts and bought 15 March RUT 650 puts for a credit of about: $.40 ($600). Then we sold 15 March RUT 790 calls and bought 15 March RUT 800 calls for a credit of about: $.50 ($750).

Total net credit and profit potential of $.90 ($1,350). Maintenance is $15,000 (IF you have the right broker). Maximum profit range is 660 to 790.

CPTI March Position #3 - SPX Iron Condor - 1281.58
With the SPX at about 1265 we sold 10 March SPX 1190 puts and bought 10 March SPX 1175 puts for a credit of $.75 ($750). Then, a few days later on a bounce, we sold 10 SPX March 1320 calls and bought 10 March SPX 1335 calls for a credit of $.80 ($800).

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 - 1281.58
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. We reversed our position and put on four contracts of the 1280/1255 bull put spread. Our current adjusted profit potential is $1,420 with new maintenance of $10,000. We had to reverse again. Our new position is a 1280/1305 bear call spread with a profit potential of $1,600. We now want the SPX to close below 1280.

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CPTI CURRENT APRIL POSITIONS
CPTI April Position #1 - RUT Iron Condor - 726.34
With the RUT trading at 732.45: We sold 10 April RUT 650 puts and bought 10 April RUT 640 puts for a net credit of $.50 ($500). Then we sold 10 April RUT 800 calls and bought 10 April RUT 810 calls for a credit of about $.45 ($450). Our total net credit and profit potential of $.95 ($950). Maximum profit range 650 to 800. Maintenance is $10,000 (IF you have the right broker).

CPTI April CPTI Position #2 - SPX Bull Put Spread - 1281.58
With the SPX trading at 1287.79, we put on one half of a possible Iron Condor. We sold 10 April SPX 1195 puts and bought 10 April SPX 1180 puts for a credit of $.60 ($600). Our credit and profit potential is $.60 ($600). We have an 82 point cushion. That's a good sleeping cushion. We'll wait on the bear call spread to see if the market is going to break out to the upside. Then we'll make a decision about what strikes to use for the bear call spread, if any.

CPTI April Position #3 - RUT Iron Condor - 726.34
On Friday, March 3rd, with the RUT trading at about 740, we put on our second RUT Iron Condor for April. We sold 12 April RUT 670 puts and bought 12 April RUT 660 puts for a credit of about $.55 ($660). Then we sold 12 April RUT 800 calls and bought 12 April RUT 810 calls for a credit of about $.55 ($660). Our total net credit and profit potential is $1.10 ($1,320). Our maximum profit range is 670 to 800 and our maintenance is $12,000.

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ONGOING STRATEGIES
ZERO-PLUS Strategy -
A few years ago$, 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 - 1281.58
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 - Closed
We owned 10 January 2007 $42 puts and 10 January 2007 $32 calls at a total cost of $14,600. Only $4,600 was at risk as the other $10,000 of intrinsic value would always be there.

ADJUSTMENT: Closed Out QQQ ITM Strangle Position
With the QQQQs trading at about $40.55, we bought back the short February $37 call for $3.60 ($3,600). Then we sold the Jan. 2007 $32 calls for $10.20 ($10,200). We also sold our Jan. 2007 $42 puts for $2.90 ($2,900). Our net credit for these transactions was $9,500.

It originally cost us $14,600 to initiate the position. We collected, over the life of the trade, $5,950 in premium. We had $9,500 plus the $5,950 premium for a total of $15,450. Subtracting our initial cost of $14,600 leaves us with a profit of $850. It's not that much considering all the effort we put forth, but a profit is still a profit. Now, the funds that were tied up are free for use in a better opportunity. Our return on the $4,600 risk was about 18.5%.

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NEW CPTI SEMINAR DATES:
APRIL 29 & 30 - NEWARK, NEW JERSEY
MAY 13 & 14 - SAN FRANCISCO, CA

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 Las Vegas CPTI Seminar was sold out and 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!

36 OUT OF 39 PROFITABLE MONTHS -- SOON TO BE 37 OUT OF 40!!
WANT TO ACHIEVE SUCCESS WITHOUT STRESS?
OF COURSE YOU DO!!
USE OUR CPTI WEALTH-BUILDING TECHNIQUES!

You should really try and make one of my 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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