Option Investor
Updates

PENNY PINCHING ON SPREAD ORDERS?

HAVING TROUBLE PRINTING?
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Have you noticed anything different recently about your spread fills? Take a look in the "last trade" column on your option chain. You will likely see "last trades" in penny increments. We're used to nickel increments. This may be a preview of things to come.

In a recent press release on PRNewswire, I read that OptionsXpress and BrokersXpress "introduced penny increment pricing capabilities on certain option spreads. The move comes in advance of an industry-wide SEC penny quoting trial expected to begin in January 2007, and is made possible through a new penny pricing system just introduced by the International Securities Exchange (ISE)."

They went on to say that the penny pricing of options will benefit the market as a whole and that tighter prices should bring more opportunity for more investors and more liquidity, as trades will require smaller market movements to be successful. Also, penny pricing has the potential to help traders more efficiently manage risk and reward.

What Does The Future Hold?
So, the question remains as to whether or not it will help. For our purposes, the RUT seems to have the most of these "penny" increment trades. Will we be able to eventually place orders for a credit limit of $.52 instead of $.50 or $.55? That would certainly be interesting. There could be chaos. I think it has the potential to drive the market makers crazy (which isn't necessarily a bad thing). However, while it seems that fills might be easier to come by, it might put traders in a bidding war for certain spreads.

That would place a premium on improving one's trading skills for the entering (and occasional exiting) of trades. No more would traders be able to blindly put out a credit limit for $.65. Would another trader put in a bit at a credit limit of $.64 to undercut those at $.65? How about $.63?

Might be interesting, indeed.

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NOVEMBER COUNTDOWN
How Are We Doing?

With two weeks left to November expiration we seem to be in pretty good shape. The market has come down and is still a bit toppy. November is typically a bullish month. It's given us fits in the last two years. This year it looks like the October run-up may have taken some of the steam out of November.

To hear the technical analysts (who think they know) tell it, there should be a bit more consolidation and possibly a steeper pullback before the market will make another move up. They're right sometimes. Let's hope this is one of those times.

When I put out the RUT trade this week, some CPTI traders weren't able to get into the 830/840 Dec. bear call spread. They emailed me asking about possibly using the 820/830 or 810/820 bear call spreads. While they may end up being profitable, I'm still concerned that this pullback might be a head fake.

To move the December RUT bear call spread below the original 830/840 (at this point) would be something for the more aggressive trader. Again, if one chooses the 820/830 bear call spread, you can reduce your risk a bit by not doing as many contacts as you did with your bull put spread.

Our November MID bull put spread is in fine shape. We have an 86+ point cushion. If you need to free up cash for other uses, there should be plenty of opportunities to unwind the 690/680 for a nickel.

This week the market will pretty much be on its own. There's not a lot of economic news to move the market this week and not a lot of earnings left to announce. Our only unknown will be the mid-term election. There will be an initial reaction, and then a reaction to the reaction. Who's going to lead our country? Clearly, the best leaders are in the business world. So, we get to pick from the leftovers. It's a shame.

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Ft. Lauderdale SOLD OUT! - L.A. Still Open
I'm proud to announce that Ft. Lauderdale is sold out. With one week left, you can put your name on a waiting list. Life is unpredictable, there may be a cancellation. It happens.

What are you waiting for? Contact me and come experience a weekend you'll never forget. Then, go home with wisdom that will last you a lifetime. Spots are still available for our L.A. December seminar in La-La Land.

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NOVEMBER CPTI PORTFOLIO POSITIONS
CPTI November Position #1 - RUT - Iron Condor - 752.73
With the RUT at about 722, we sold 20 November RUT 620 puts and bought 20 November RUT 610 puts for a credit of about $.50 ($1,000). Then we sold 20 November RUT 800 calls and bought 20 November RUT 810 calls for a credit of about $.60 ($1,200). Our total net credit and profit potential is $1.10 ($2,200). Maximum profit range of 620 to 800 -- 180 points!! Maintenance is $20,000 -- IF you have the right broker.

CPTI November Position #2 - MID - Bull Put Spread - 776.35
With the MID at about 755, we sold 20 November MID 690 puts and bought 20 November 680 puts for a credit of $.75. Our potential profit is $1,500. Maintenance is $20,000. I'll keep on the lookout for a safe bear call spread to complete our Iron Condor. However, if I don't find an appropriate bear call spread, I'm perfectly content to sit with this bull put spread to expiration.

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DECEMBER CPTI PORTFOLIO POSITIONS
CPTI December Position #1 - RUT - Iron Condor - 752.73
With the RUT at about 760, we sold 20 December RUT 680 puts and bought 20 December RUT 670 puts for a credit of about $.45 ($900). Then we sold 20 December RUT 830 calls and bought 20 December RUT 840 calls for a credit of about $.60 ($1,200). Our total net credit and profit potential is $1.10 ($2,200). Maximum profit range of 680 to 830 -- 140 points!! Maintenance is only $20,000 -- IF you have the right broker.

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ONGOING STRATEGY - THE ZERO-PLUS Strategy
In the past, I outlined a strategy based on an initial investment of $100,000. At that time, $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.

Our October RUT Iron Condor position expired worthless - according to plan. We have added another $3,800 of premium to our cash stash. We have now generated $51,050 ($47,250 + $3,800).

October Zero Plus Position: PROFIT: $3,800
With the RUT at about 708, we sold 40 October RUT 610 puts and bought 40 October RUT 600 puts for a credit of about $.50 ($2,000). Then we sold 30 October RUT 790 calls and bought 30 October RUT 800 calls for a credit of about $.60 ($1,800). Our total net credit and profit potential is $1.10 ($3,800). Maximum profit range was 610 to 790 -- 180 points!!

Watch for a new Zero Plus position - COMING SOON!!

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CPTI SEMINAR SCHEDULE!
November 11/12 - Ft. Lauderdale -
SOLD OUT!
December 2/3 - Los Angeles

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!

44 OUT OF 47 PROFITABLE MONTHS!!
WANT TO ACHIEVE SUCCESS WITHOUT STRESS?
OF COURSE YOU DO!!
USE OUR CPTI WEALTH-BUILDING TECHNIQUES!

You should definitely 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?

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HAPPY TRADING!
Remember the CPTI credo: 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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