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A FEW NEW POSITIONS IN THE BOOKS

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A FEW NEW POSITIONS ON THE BOOKS

On Nov. 27th, the market cooperated - even if was for just one day. It came down like a brick. So, we took advantage of the downdraft and got a few positions filled. They both happened to be on the RUT - one for December and another for January.

On Sunday, I tossed out some "what if" scenarios. The market came down hard and fast - fast enough to adjust our Dec. 740/730 bull put spread down a strike. We were filled at $.50 for the RUT December 730/720 bull put spread. The 740/730 bull put spread offered more premium and will likely prove to be pretty safe. However, when faced with premium vs. safety, for me, safety will win out every time.

The nice part is that, in the last three days, the market moved back up - almost to where it was before Monday's dump.

The same downdraft enabled us to put on our first January position, filling 20 contracts of the January 690/680 bull put spread at $.50 ($1,000). Remember that the positions I suggest for our portfolio are just that - suggestions. They are to be used as guidelines. If opportunities present themselves, pounce on them. You need to combine flexibility with creativity and some common sense.

So, we have a decent start to January and have added a second position to our December CPTI portfolio. We'll keep our eyes out for more trading opportunities.

On The Road Again
On Friday, I'll be traveling to Los Angeles for our weekend CPTI 2-day advanced seminar. I'm looking forward to another great group - including seeing a number of old friend who are retaking the seminar. I'm scouting around for a good location for the next seminar, probably the end of February or the beginning of March. Do you have any suggestions? Let me know. I'll try to schedule one as close to as many of you as possible.

Favorite Trading Day
Friday is usually one of my favorite days to trade. Why? So we can hopefully grab that little extra premium that would erode away over the weekend. There's not that much premium out there. We have to scrounge around for whatever we can get.

If we get another pullback, like the one on Monday, I'd be looking at the January SPX 1290/1275 bull put spread or even the 1300/1285. Try to get at least $.60. Remember, on a 15-point spread, we like to get about $.60. On a ten point credit spread, our minimum acceptable premium credit is about $.40. Do a number of contracts that will make the trade worthwhile.

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Hi, Mike - I am a rookie to your CPTI. I did pretty well at getting into the trades in August but haven't been as successful in the last month. I'm attempting entry within a couple of hours of the blog, but the parameters indicated aren't available at that time. Usually the prices quoted have been decreased to the point that even half of the premium is not available and I haven't entered anything. Maybe I should at least open up one leg if it is available at your quote? - Henry

Hi Henry - Yes, it can be difficult to get into the positions at times. When the opportunities present themselves, they may be there for two minutes, twenty minutes or longer. As you know, the market can move dramatically in a matter of minutes. And then it can come right back. Some CPTIers get fills right away, some later in the day, and some the next day, and of course, some not at all. And keep in mind that there is often more premium there than meets the eye.

The positions that I post should really be used as guidelines. Nothing is etched in stone. If the market moves, the strikes may need to be adjusted or the credit limit. We discuss that at the seminar. The thing traders need to be careful of is getting too greedy. New traders have a tendency of moving the strikes closer in order to get more premium. They can end up paying a steep price for that decision if the market moves against them.

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Hi Mike - Doing well with the program but I have one concern to ask about. I am always worried about particularly terrorist episodes and being in a condor or spread at that time. With are average position it puts us say 45-60 days initially to expiration. 9/11 took the stock market about 2 months to recover. Holding a stock we have the chance of recovery whereas in our position we may not have the time and end up losing years of potential profits with the serious hit on our capital. Is there anything you might comment on here to make me feel better? Thanks. - Jim

Hi Jim - I understand your concern. A number of people ask the same question. If there is another 911, and the market tanks, it may not recover before expiration. But, also remember that we're using European style index options that cannot be exercised early. If we believe that the market will rebound in another two months, we would NOT necessarily hold our current position through expiration when they cash settled. We can roll out the existing position for another two months to give the market a chance to bounce back. We'll buy a little time and that usually heals most wounds.

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CURRENT DECEMBER CPTI PORTFOLIO POSITION
CPTI December Position #1 - RUT - Iron Condor - 786.12
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 $1.05 ($2,100). Maximum profit range of 680 to 830 -- 140 points!! Maintenance is only $20,000 -- IF you have the right broker.

CPTI December Position #2 - RUT - Bull Put Spread - 786.12
We sold 20 December RUT 730 puts and bought 20 December RUT 720 puts for a credit of $.50 ($1,000). Our net credit and profit potential is $.50 ($1,000). Maintenance is $20,000. We'll look for a bear call spread, but don't hold your breath. With the market trending up, we're probably going to be satisfied with the bull put spread.

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CURRENT JANUARY CPTI PORTFOLIO POSITION
CPTI January Position #1 - RUT - Bull Put Spread - 786.12
We sold 20 January RUT 690 puts and bought 20 January RUT 680 puts for a credit of $.50 ($1,000). Our net credit and profit potential is $.50 ($1,000). Maintenance is $20,000. If the market stops trending, we'll look for a bear call spread to complete our Iron Condor.

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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. We have now generated $51,050 ($47,250 + $3,800).

New Zero Plus Position: To Be Announced

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CPTI SEMINAR SCHEDULE!
New Date To Be Announced Soon

If you really want to take your trading from a "hobby" to a potentially profitable "business," you need 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 Los Angeles. Contact me and I'll personally 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!

45 OUT OF 48 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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