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A MEMORABLE THURSDAY

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We've had an interesting Thursday. In the last few days, the market has shot up and we found ourselves having to deal with a somewhat "close" short call situation - the August 1310 short call, to be specific. That makes tomorrow morning's SPX settlement number very interesting for a lot of people.

The market traded up to 1300.78 today - sending a few chills up and down the spines of some CPTI traders. A little more nervous are the CPTI traders who moved their strike prices to 1305 when they initiated the trade.

The risk tolerance of the 1310 and 1305 holders determined whether or not they bought back their short positions - dodging a potential bullet. The nice part of this month's expiration is that the move took place very late in the option cycle. A huge chunk of the time value had already eroded away from the options by the time the market started up. So, even if some traders bought back either the 1305 or 1310 short position, they would have likely still been profitable on their SPX Iron Condor. Plus, by buying back the short call, some traders have freed up some additional maintenance dollars for other uses.

The Friday morning settlement number should be exciting - especially for those short the 1305 calls. They have a 7.52 cushion. That is precarious, to say the least. Holders of the short 1310 calls have a 12.52 cushion, which is safer, but not out of range. We've seen some bizarre Friday settlement numbers in the past. In after hours trading, the market is lower - which is good. But a lot can happen between now and tomorrow morning's open.

Good luck to those who need it - and sweet dreams to those who don't.

New CPTI Trade
Earlier today I suggested a new September CPTI trade - another Iron Condor on the Russell (RUT). As the market has moved up of the last few days, the volatility has moved down. There are not a lot of good trades out there - especially for our strategies that rely on premium being available.

There was an issue with the trade - something we haven't encountered before. There was a problem with the suggested 750/760 bear call spread. Earlier this month we put on another RUT Iron Condor with a 760 short call and a 770 long call. The problem is trying to establish both positions in the same brokerage account. You can't short the 750 call and then buy the 760 call when you are already short the 760 call in a previous position. Essentially, you'd be buying back the short call - leaving you short 12 contracts of the 750 calls and long 12 contracts of the 770 calls - a 20-point bear call spread.

A 20-point bear call spread is not the end of the world. We have additional 10 points of exposure and it plays havoc with our maintenance numbers. Twelve contracts of the 20-point bear call spreads would have a $24,000 maintenance requirement. Because the spread sizes don't match up, the bull put spreads would each have a $12,000 maintenance requirement. Basically, it just confuses the issue and ties up a lot of money.

Many CPTI students have multiple accounts -- both a brokerage account and an IRA account, etc. They are able to do both positions. Other CPTI students, for one reason or another, didn't get into the first RUT Iron Condor, so they would have no problem.

When faced with that problem, you should look at the possibility of the next strike price further away or consider if you want to just have the bull put spread -- until an opportunity may present itself for putting on an acceptable bear call spread.

Many brokers have different policies. Always check with your broker if you have a question about a potential position before placing your order.

See the details of today's suggested position under "Current September CPTI Trades).

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Memorable
-- "The greatest lesson in life is to know that even fools are right sometimes." Winston Churchill

-- "Anything I've ever done that ultimately was worthwhile initially scared me to death." -- Betty Bender

-- "Eliminate worry by identifying the worst possible outcome of every situation." -- Brian Tracy

-- "Do not give any time to your past. You can't change what happened 5 minutes ago." -- Jan Ruhe

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NEW SEMINAR DATE - Nov. 11/12 - Ft. Lauderdale
The Couch Potato Trader has a great following in Florida. We had an excellent seminar in Jacksonville last year and now I have finalized the arrangements for another visit to the Sunshine State - this time to Ft. Lauderdale. So, adjust your schedule and plan to attend. Contact me. I will personally call you to go over the details and answer all of your questions.

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CPTI CURRENT AUGUST POSITIONS
CPTI August Position #1 - SPX - Bull Put Spread - 1297.48
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 - 710.78
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.

CPTI August Position #3 - SPX - Iron Condor - 1297.48
On 7/17, with the SPX at about 1235, we sold 12 August SPX 1125 puts and bought 12 August SPX 1110 puts for a credit of $.60 ($720). Then we sold 12 August SPX 1310 calls and bought 12 August SPX 1325 calls for a credit of about $.60 ($720). Total net credit and profit potential of $1.20 ($1,440). Max profit range is 1125 to 1310. Maintenance is $18,000.

CPTI August Position #4 - RUT Iron Condor - 710.78

On Friday afternoon, 7/21, with the RUT at about 671, we sold 15 August 600 puts and bought 15 August RUT puts for a credit of about $.65 ($975). Then we sold 15 August RUT 740 calls and bought 15 August RUT 750 calls for a credit of about $.50 ($750). Total net credit and profit potential is $1.15 ($1,720). Maximum profit range is 600 to 740. Maintenance is $15,000 - IF you have the right broker.

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SEPTEMBER CPTI PORTFOLIO POSITIONS
CPTI September Position #1 - SPX - Bull Put Spread - 1297.48
On Monday, August 7th, with the SPX at about 1280, we sold 12 SPX September 1190 puts and bought 12 SPX September 1175 puts for a credit of $.70 ($840). Maintenance is $18,000. I'll be looking for an opportunity to put on a bear call spread to complete the Iron Condor.

CPTI September Position #2 - RUT - Iron Condor - 710.78
On Thursday, August 10th, with the RUT at about 686, we sold 15 RUT September 590 puts and bought 15 RUT September 580 puts for a credit of $.55 ($825). Then we sold 15 September RUT 750 calls and bought 15 September 760 calls for a credit of $.50 ($750). Net credit and profit potential of $1.05 ($1,575). Maximum profit range is 590 to 750. Maintenance is $15,000.

CPTI September Position #3 - RUT - Iron Condor - 710.78
On Thursday, August 17th, with the RUT at about 708, we sold 15 September RUT 640 puts and bought 15 September RUT 630 puts for a credit of $.45 ($675). Then we sold 15 September RUT 760 calls and bought 15 September RUT calls for a credit limit of $.80 ($1,200). Net credit and profit potential of $1.25 ($1,875). Maximum profit range is 640 to 760. Maintenance is $15,000.

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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 July RUT Iron Condor position expired worthless - according to plan. We can now officially add the $2,300 of premium to our cash stash - to take us well over the $40,000 mark. We have now generated $44,950 ($42,650 + $2,300).

August Zero Plus Position: RUT Iron Condor - 710.78
On Friday 7/21, with the RUT at about 671, we sold 20 August 600 puts and bought 20 August RUT puts for a credit of about $.65 ($1,300). Then we sold 20 August RUT 740 calls and bought 20 August RUT 750 calls for a credit of about $.50 ($1,000).

Total net credit and profit potential of $1.15 ($2,300). The maximum profit range is 600 to 740 - 140 points. Maintenance is $20,000 - IF you have the right broker.

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CPTI SUMMER SEMINAR!
NOVEMBER 11/12 - FT. LAUDERDALE

Now you have two choices for which CPTI seminar you'd like to attend. Don't put off making your reservation. Airline tickets get more costly the closer you get to the event. If you really want to take your trading from a "hobby" to a potentially 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 - and a nice lifestyle - one that can last a lifetime.

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 Ft. Lauderdale. 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. Remember, if you attend one of my CPTI seminars, you are entitled to RETAKE the seminar a SECOND TIME at NO CHARGE!

41 OUT OF 44 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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