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OUT OF THE WOODS? NOT YET

HAVING TROUBLE PRINTING?
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OUT OF THE WOODS? NOT YET

Last week was quite a ride. We're not out of the woods yet. Far from it. We have the smallest of cushions on our RUT bull put spread - a little over 11 points. Based on Friday's closing numbers, it would cost about $2.80 to unwind the spread. We originally took in about $1,650. That would mean a loss of $115 per contract - a small cost of doing business.

There's no real confirmation that the downtrend will continue. Nor, is there an indication that the downward trend has reversed. It's a crapshoot. Will you stay in the position? Or will you bail? Either decision is understandable. The conservative trader would have closed the position last week. What's your risk tolerance? What's your account size? What percentage of your brokerage account have you allotted for this particular trade? How close or far from a support level is the underlying?

These are all questions you need to ask yourself before you can establish an exit point you can stick with. As you can see, there is no one exit point that will be right for everyone. Think it through. Be honest with yourself. Conservation of trading capital should be at the top of your list. But, be prepared to live with your decision.

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So What's Stopping Us? Nothing!!
Last Sunday we were discussing the Zero-Plus Strategy. In its simplest terms, it's a matter of buying a U.S. Treasury "Strip" (Zero Coupon Bond) at a discount. That frees up the discounted amount to use to trade to generate our income. In 7 years you get your $100,000 back.

Institutions do it all the time. Can we do it? Hell yes!!

Our favorite, and most consistently profitable strategy is the Iron Condor. So, it makes sense to make our projections based on the Iron Condor. Since we're perfectly logical all the time (well, maybe not ALL the time), let have a look at the numbers.

We're starting with the $29,000 discount amount. We're basing our calculations on making an average of 6% per month (72% per hear). Then, we're compounding one-half of our profits. The other profits, not used for compounding purposes, are in the last column.

Profits
Invested Profit Invested +50% Not Compounded

Year 1 $29,000 $20,880 $39,440 $10,440
Year 2 $39,440 $28,400 $53,640 $14,200
Year 3 $53,640 $38,620 $72,950 $19,310
Year 4 $72,950 $52,520 $98,710 $25,710
Year 5 $98,710 $71,070 $134,295 $35,585
Year 6 $134,295 $96,690 $182,640 $48.345
Year 7 $182,640 $131,500 $248,390 $65,750
= $219,340

Let's look at what we've accumulated - with none of our $100,000 principal at risk.

1) Our initial investment of $29,000 has climbed to $248,390 by compounding it with half of the yearly profits.

2) The other half of the yearly profits were set aside, totaling $219,340. This amount could be substantially higher if put into a simple no risk 5% CD or even Treasury Bills.

So, we now have amassed about $467,730. We'll subtract the original $29,000 and show a net profit of $438,730. What did we originally risk in real dollars to achieve this ridiculously large number? Only the $29,000. I'm almost embarrassed to calculate the return on risk. I said - almost! Dividing the profit - $438,730 - by the amount risked -- $29,000 - gives you a return of over 15-times your risk.

We all know there will be both good years and not-quite-as-good years with our Iron Condors. While, it's true that we can make numbers say almost anything, the above numbers should be a lot closer to the rule than the exception. It helps to be a skilled trader. Where do those skills come from? There are still a few spots left for the San Francisco seminar. Need I say more?

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COUNTDOWN TO SAN FRANCISCO - JUNE 17/18

ONLY ONE WEEK LEFT! TWO SPOTS REMAIN!!

TESTA-MONEY-ALS
Mike -- Just wanted to let you know that one of the things I got the most value out of from your class was how to negotiate with the market makers. Based on the extra premium I made on a couple condors this past month, I made almost enough to pay for the class. J.R.

Hey Mike -- I almost always laugh when I read your newsletters. I have learned a lot since I sat - so very green - in your class, and learned so much. I have been making a living these last 2 1/2 months trading. Thanks for your continued coaching. I plan to retake your class sometime this summer. Doug B.

DO YOU HAVE PROFIT-ABILITY?
There are a lot more where these came from. It's always a challenge for me when I have a roomful of bright people who are excited and have a passion for learning. We go over everything imaginable - from the non-directional strategies to the psychology of trading. We cover a lot more than the mechanics. Inquiring minds want to know the whens and the whys, not just the hows. That way, they're prepared for the best and the worst - and know the best way to handle either situation. There are still spots open for San Francisco. Contact me and I'll call you with all the details.

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CPTI CURRENT JUNE POSITIONS
CPTI June Position #1 - RUT Iron Condor - 701.39
On 5/1, we sold 15 June RUT 690 puts and bought 15 June RUT 680 puts for a credit of $.55 ($825). Then, we sold 15 June RUT 830 calls and bought 15 June RUT 840 calls for a credit of $.55 ($825). Our total credit and profit potential is $1.10 ($1,650). Maximum profit range is 690 to 830 (130 points!). We'll be exposed for about seven weeks. Maintenance is $15,000 - IF you have the right broker.

CPTI June Position #2 - SPX Bull Put Spread - 1252.30
On 5/3, we sold 12 June SPX 1230 puts and bought 15 June SPX 1215 puts for a credit of $.60 ($720). Maintenance is $18,000.

CPTI June Position #3 - SPX - Iron Condor - 1252.30
On 5/16 with the SPX trading at about 1295, we sold 12 June SPX 1220 puts and bought 12 June SPX 1205 puts for a credit of $.50 ($600). Then we sold 12 June SPX 1350 calls and bought 12 June SPX 1365 calls for a credit of $.70 ($840). Total net credit and profit potential of $1.20 ($1.440). Our maximum profit range is 1220 to 1350. The maintenance is $18,000 -- IF you have the right broker.

CPTI June Position #4 - RUT - Iron Condor - 701.39
On 5/22, we sold 15 June RUT 780 calls and bought 15 June RUT 790 calls for a credit of about $.45 ($675). Then we sold 15 June RUT 640 puts and bought 15 June RUT 630 puts for a credit of about $.50 ($750) for a total net credit and profit potential of about $.95 (1,425). Our maximum profit range is about 140 points - from 640 to 780. Maintenance is $15,000 - IF you have the right broker.

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CPTI CURRENT JULY POSITIONS
CPTI July Position #1 - SPX - Bull Put Spread - 1252.30
On Friday, 5/26, we put on our first position for July - a bull put spread 1165/1150 for a credit of $.60. I watched as hundreds and hundreds of the 1165/1150 spreads were filled throughout the day at that credit limit.

CPTI July Position 2 - RUT - Iron Condor - 701.39
On Thursday, 6/1, with the RUT at about 730, we sold 15 RUT July 630 puts and bought 15 RUT July 620 puts for a credit of about $.55 ($825). Then we sold 12 RUT July 800 calls and bought 12 RUT July 810 calls for a credit of about $.55 ($660). Our maximum profit range is 630 to 800 -- that's 170 points!! Maintenance is 15,000 -- IF you have the right broker.

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ONGOING STRATEGIES
ZERO-PLUS Strategy -
In the past, 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. We are not compounding our profits by dramatically increasing the number of contracts we trade. Just think of how well we would be doing if we had increased the number of contracts, even a little.

Our May RUT Iron Condor position expired worthless - according to plan. We can now officially add the $2,100 of premium to our cash stash - to take us well over the $40,000 mark. We have now generated $42,650 ($40,550 + $2,100).

Current Zero Plus Position: RUT Iron Condor - 701.39
On Monday we put on the identical, June RUT Iron Condor - consisting of 20 contracts of a bear/call spread of 780/790 and a bull put spread of 640/630 for a credit of about $.95. Our potential profit is $1,900. The maintenance is $20,000 -- IF you have the right broker. The profit range is 640 to 780.

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QQQ ITM Strangle - Closed Out Previous QQQ ITM Strangle Position
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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CPTI SPRING SEMINAR DATE:
JUNE 17 & 18 - 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 call you with all the pertinent information. The price is a bargain - 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 Newark CPTI Seminar was a great success (no surprise, they all are). There are now 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!

39 OUT OF 42 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 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 should 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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