Option Investor
Updates

HOW ARE WE DOING SO FAR?

HAVING TROUBLE PRINTING?
Printer friendly version
?

As we move toward our 41st profitable month (out of 44), we are, as Freddy Prince Sr. used to say, "Looking gooooooood." With four trading days (and, of course, the Friday morning settlement) remaining in the July cycle, let's take a look at our four positions and see if we will sleep well this week or if we should break out the supply of TUMS and keep our therapist on speed dial.

Position #1 - SPX Bull Put Spread 1165/1150 - about a 77+ point cushion

Position #2 - RUT Iron Condor 630/620 & 800/810 - 57 point cushion to the downside and 112+ points to the upside. If you are still with one of those primitive brokers that holds maintenance on both sides (and I know that some stubborn CPTI traders are), consider closing the 800/810 bear call spread for a nickel to free up $15,000 of maintenance. You will only have to buy back the short call. The long 810 call will expire worthless. If, by some bizarre chance, the market flies up, it may have some value. Some traders simply throw out a GTC order to sell the long 810 call for a nickel or a dime. It's like a free lottery ticket. Plus, it doesn't cost anything to put out the order.

Position #3 - SPX Iron Condor 1165/1150 & 1320/1335 - a 77+ cushion on the downside and a 77+ cushion to the topside. Couldn't be more in the middle if we placed it there ourselves. Like our RUT Iron Condor, you should be able to close the 1320/1335 bear call spread for about a nickel and free up $18,000 maintenance dollars. Again, just buy back the short call and throw out an order for the long 1335 call.

Position #4 - RUT Iron Condor 610/600 & 770/780 - a 77+ point cushion to the downside and an 83 point cushion on the upside.

In summary - we're in damn good shape. If Freddy Prinze hadn't committed suicide (maybe he was a directional trader), he would agree. We'll put the TUMS away and give the shrink the week off - unless you have other issues, of course.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Oil's Well That Ends Well
I found the information that follows at an interesting site called knowledgenews.net - a good source for those of you who are information and trivia buffs. Oil has a big influence on the markets. So, I thought a little deeper understanding of it couldn't hurt. I learned from this. You may too.

Oil companies generally pump their black gold from large underground pockets called fields, which come in many shapes and sizes. The oil from a small field might not fill the average Hollywood swimming pool. But the largest, Saudi Arabia's Ghawar field, produces around 5 million barrels a day, and it's been cranking out crude since 1951. (A barrel, by the way, contains 42 gallons, or 159 liters, of oil.)

The chemical composition of the oil, and the cost of extracting it, varies from field to field. So while you may think oil is oil, more than 160 varieties of the stuff are traded in markets around the world. You can buy West Texas Intermediate, Saharan Blend from Algeria, Tia Juana Light from Venezuela, or Brent Blend from the North Sea. And that's just the appetizer menu.

Got Oil? Prove It!
A field's "reserve" is the amount of oil that can be extracted from it. Determining the size of a reserve involves geology, economics, and some educated guesswork. Different methods are used to calculate reserve sizes, and estimates can vary widely depending on the source. The figures used most often by the media represent so-called "proven" reserves.

Basically, proven reserves measure the amount of oil producers can safely expect to pump from known reservoirs and sell at a profit under current conditions. In 2005, the oil industry estimated that the world's total proven reserves come to roughly 1.2 trillion barrels.

Most of this oil (62 percent) comes from the Middle East--mainly from Saudi Arabia (22 percent), Iran (12 percent), and Iraq (10 percent). The United States has just a little more than 2 percent of the world's proven reserves.

Although the world is using oil at a record pace--it consumed around 30 billion barrels in 2005--proven reserves have actually increased by 56 percent over the past twenty years. Some of this growth comes from the discovery of new oil fields, but most of it is economics.

Improvements in technology have made oil extraction more cost effective, while market forces have driven oil prices up. Simply put, oil that once wasn't worth extracting has become profitable to pump, and that increases the size of the world's "proven" reserves.

Take Canada's Athabasca oil sands. Located in Alberta, the oil sands are a mixture of sand, clay, water, and a tar called bitumen, from which oil can be extracted. Extracting the oil used to be prohibitively expensive, but today's oil prices are changing that equation. According to Alberta's government, 175 billion barrels are already recoverable--enough to make Canada second only to Saudi Arabia in proven oil reserves.

Lots Left? Hard to Say
Experts still disagree over how much of Alberta's tar-trapped oil should count as proven reserves. The same goes for oil sands in Venezuela and oil shale in the United States. Yet any large new oil reserves probably will come from nontraditional sources like these. Few industry insiders expect to find a new field like Saudi Arabia's Ghawar.

Already oil producers have a hard time replacing the 30 billion barrels the world uses up each year, and consumption rates continue to rise. If consumption continually outstrips the discovery of new reserves, global supply will inexorably shrink (some experts think this is already happening). The future of oil may well come down to a race between consumption and innovation--including innovations to reduce consumption.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

CPTI CURRENT JULY POSITIONS
CPTI July Position #1 - SPX - Bull Put Spread - 1236.20
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 - 681.24
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 - 1236.20
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 - 681.24
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.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

CPTI CURRENT AUGUST POSITIONS
CPTI August Position #1 - SPX - Bull Put Spread - 1236.20
On Thursday morning, 7/6, with the SPX at about 1273, we put on our first position for August - 12 contracts of a bull put spread 1175/1160 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. At this writing, we have a nice fat 90 point cushion.

CPTI August Position #2 - RUT - Iron Condor - 681.24
On 7/10, with the RUT trading at about 713 we sold 15 RUT August 780 calls and bought 15 RUT August 790 calls for a credit of $.65 ($975). Then we sold 15 RUT August 630 puts and bought 15 RUT August 620 puts for a credit of $.50 ($750). Total net credit of $1.15 ($1,725). Max profit range is 630 to 780. Maintenance is $15,000 - IF you have the right broker.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

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 June 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: SPX Iron Condor - 1236.20
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.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

CPTI SUMMER SEMINAR DATES!
AUGUST 12/13 - CHICAGO
SEPTEMBER 16/17 - PHOENIX

If you want to take your trading from a "hobby" to a consistently profitable "business," you'll want the information you'll learn at my CPTI seminar. You'll learn more than the "how to's" of trading our strategies. You'll learn a new lifestyle - an enviable lifestyle - one that can last a lifetime.

Now you have two choices. Which CPTI seminar will YOU attend -- Chicago or Phoenix? Don't put off making your reservation. Airline tickets get more costly the closer you get to the event.

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.

FREE RETAKE
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 make the effort to attend 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?

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

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

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

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
.

Couch Potato Trader Updates Archives