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LESS GUTS, LESS GLORY, BUT STILL PROFITABLE!

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OK, let's have a little fun. Based on the number of emails I've received about the Short Guts strategy, it seems like a lot of you may be interested. You want another example that is less risky, so, here it is.

By the way, this strategy is looking better and better to me. I may include one of these plays in our August CPTI portfolios.

Earlier today, the OEX was trading at about 585 today, here's what we'll do:
Sell 2 XEO August 565 calls @ $24.25 ($4,850)
Sell 2 XEO August 605 puts @ $20.25 ($4,050)
Total premium taken in: $44.50 ($8,900)
Profit potential: $4.50 x 2 contracts = $900.

The difference between today's position and last weeks Short Guts example is that our maximum profit range is 40 (565-605) points instead of 20 points (560 - 580). The most profit we can make on the trade is about $4.50 per contract - as opposed to $7.50 per contract in last week's example.

Our profit range is now 609.50 (605 + 4.50) down to 560.50 (565 - 4.50). We will make the full 4.50 if the XEO closes between 565 and 605. The profit range will give up less profit, depending on where it finishes above 605 or below 656.

The exit parameters are clear. They are the same as our profit range. Again, one of the major benefits of the Short Guts strategy is that the risk is significantly lower. Why? Because, if the XEO reaches either parameter, it will be so deep in the money that very little time value will remain to be bought back.

Now, to avoid the large maintenance requirements, let's look at covering our "shorts" with some out of the money longs.

XEO Aug. 625 calls = $.20
XEO Aug. 545 puts = $1.30
Costs for covering shorts option positions = $1.50 x 2 contracts = $300.00
Net profit on the two-contract position is $600 ($900 - $300).

Now, each spread is 60 points. $60 x 200 (2 contracts) = $12,000. Calculate the potential return by dividing the $600 by $11,400 = 5.25% -- not too shabby for a short term trade.

The Short Guts strategy has many possibilities. The above example has a max profit range of 40 points. The XEO has $5 strike price increments, so one can create a range that fits with your risk tolerance and comfort level. It's the old balance between premium and safety. I hope you make the right choice.

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Today's CPTI Portfolio Trade
In case you missed the email this morning, we began our journey into the August cycle with a SPX bull put spread. We sold 12 August SPX 1175 puts and bought 12 August SPX 1160 puts for a credit of $.60 ($720). We will be looking for an opportunity to put on a bear call spread to complete the Iron Condor.

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CPTI CURRENT JULY POSITIONS
CPTI July Position #1 - SPX - Bull Put Spread - 1274.08

On Friday, 5/26, we put on our first position for July - 12 contracts of a bull put spread 1165/1150 for a credit of $.60 ($720). 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 - 720.64
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.

CPTI July Position #3 - SPX Iron Condor - 1274.08
On Friday 6/16, we sold 12 July SPX 1165 puts and bought 12 July SPX 1150 puts for a credit of about $.60 ($720). Then we sold 12 July SPX 1320 calls and bought 12 July SPX 1335 calls for a credit of about $.55 ($660).

Total net credit and profit potential of $1.15 ($1,380). The maximum profit range is 1165 to 1320 - 155 points. Maintenance is $18,000 - IF you have the right broker.

CPTI July Position #4 - RUT Iron Condor - 720.64
On Friday 6/16, we sold 15 July RUT 610 puts and bought 15 July RUT 600 puts for a credit of about $.50 ($750). Then we sold 15 July RUT 770 calls and bought 15 July RUT 780 calls for a credit of about $.55 ($825). Total net credit and profit potential of $1.15 ($1,575). The maximum profit range is 610 to 770 - 160 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.

New Zero Plus Position: SPX Iron Condor - 1274.08
On Friday 6/16, we sold 20 July SPX 1165 puts and bought 12 July SPX 1150 puts for a credit of about $.60 ($1,200). Then we sold 20 July SPX 1320 calls and bought 12 July SPX 1335 calls for a credit of about $.55 ($1,100).

Total net credit and profit potential of $1.15 ($2,300). The maximum profit range is 1165 to 1320 - 155 points. Maintenance is $30,000 - IF you have the right broker.

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NEW CPTI SUMMER SEMINAR DATE!!
AUGUST 12/13 - CHICAGO

If you missed the CPTI Chicago seminar in April 2005, we're coming back - with more strategies and an even better track record than last year.

DO YOU HAVE PROFIT-ABILITY?
It's always a challenge (and a pleasure) for me when I have a roomful of bright people who have a passion for, and are excited about, 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 Chicago. Contact me and I'll call you with all the details.

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. Our CPTI seminars are limited to ONLY 25 ATTENDEES.

The San Francisco 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!

40 OUT OF 43 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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