Option Investor
Updates

2006 - THE YEAR IN REVIEW

HAVING TROUBLE PRINTING?
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2006 Was Good To Us
So, what's the verdict? Are we lucky? Are we good? Or, is it a combination of both? Let's just say that we pretty much followed our rules, used some common sense and put ourselves in a position to be lucky.

Below, we take a look at some statistics for the calendar year of 2006. You'll notice that almost one-third of our trades were individual credit spreads (one side of an Iron Condor). We were dealing with a trending market. It didn't make sense to put on the entire Iron Condor. If you think our profit of $42,915 is impressive, just imagine what it would have been if we could have topped off those bull put spreads with a bear call spread.

I know that, this year, a number of traders got themselves in big trouble by putting on bear call spreads. Was it greed? Was it ignorance? Either way, the results can be very expensive. Also, as I hope you've noticed by now, premium on the call side is less than on the put side. That means when we put on a bear call spread, we're not likely to get the same size cushion between the index and the short call strike price. Folks, it "ain't worth the risk."

The ability to exercise self-discipline - and NOT put on a tempting, though ill-advised trade - is what separates profitable from non-profitable traders. It also enables us to use our Iron Condor strategy in all market conditions. If the market is trending, simply put on the credit spread opposite the trend. We may not be making the most efficient use of all of our trading dollars. But, what's worse? Wouldn't you rather be profitable and cautious? I encourage creativity, but common sense needs to be part of the equation, too.

2006 STATISTICS (January expiration - December expiration)*
Number of positions: 37
Winners: 35 (95%)
Losers: 2 (5%)
Iron Condors: 26
Credit Spreads: 11
Total Revenues: $49,115
Average Premium/Trade: $1,327.43
Total Losses: $6,200
Average Loss: $3,100
Net Profit for 2006: $42,915

*Exclusive of commissions

Are The CPTI Portfolio Trades For Real?
Yes! Every trade I post, I actually trade. Before I send out a trade suggestion, I want to make sure that the trade is possible. I trade a lot of accounts (including my ex-wife's account - and she's very happy). You can be sure the posted trades have been filled in one or more of those accounts.

At my two-day seminars, I open up my accounts and show the attendees that I actually trade these trades - with real money! So, be assured that I with you in the trenches. You're not alone.

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Want To See The Complete Track Record?
I get a number of requests for our track record. If you are interested in viewing an Excel spreadsheet of our Couch Potato Trader trading results, going all the way back to November, 2002, just drop me an email. I'll be glad to send it to you.

Also, when send emails to me, please sign them so I know who I'm corresponding with. You'd be surprised how many emails show up without being signed. It's annoying.

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By The Way . . .
I also get a number of emails from CPTI subscribers (new and old) looking for the archive of my past columns, etc. I've searched the OI site myself for the instructions without success. So, here goes:

1. Go to the Couch Potato Trader posting page.
2. Scroll all the way down the posting page to the very bottom.
3. Click on "next" and, hopefully, another entire page of postings will appear.
4. Repeat the process - until you can't stand it any more.

The archive goes all the way back to January 2005. Lots of good stuff back there - and even a smile or two. It's worth the effort. Plus, I've been told it's a great cure for insomnia. I'm also asked about the columns from July 2002 to January 2005. Unfortunately, the articles prior to January 2005 didn't survive the ownership transition at the end of 2004.

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Last Week
The market closed out the year with an overdue down day - giving back some of the upward move from last Monday and Tuesday. All down moves are welcome. They may be telling us the upward trend is fading and, also, downward moves usually mean an increase in the VIX. That often means more premium for the good guys (that's us).

I'm going to be watching closely for opportunities for more February positions. A volatility spike would be nice.

Looking Forward to 2007
What do we have to look forward to in 2007? More of the same, I hope. I'll be doing my best to sift through the wreckage and find profitable and SAFE positions for us. From time to time, the market will make us sweat a bit. But, we'll watch for opportunities to escape with our shirts, our shorts, plus important body parts. 2007 will be an adventure, but one primarily filled with profit and satisfaction.


Have a SAFE, HAPPY, HEALTHY & PROFITABLE 2007!!

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EARLY BIRD SPECIAL - Only Two Weeks Left To Save $100.
For traders interested in attending both the Dallas seminar on March 10th & 11th or Washington, DC seminar, I offer you an "Early Bird Special." If you reserve your spot prior to January 15th, you will SAVE $100. There's nothing to compare to the one-on-one instruction, the passion, the camaraderie, and the entire experience of my seminars.

So far, over 20 CPTI students have taken advantage of the "Early Bird Special." There are still spots left in both seminars. Don't wait too long. Seminar grad, Ed, will be attending the Dallas seminar. It will be his fourth time. He already understands the strategies. He keeps coming back for the experience.

Note to former CPTI seminar graduates: There are NO free retake spots remaining for Dallas and only two free retake spots remaining for Washington, DC. He who hesitates . . .

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CURRENT JANUARY CPTI PORTFOLIO POSITIONS
CPTI January Position #1 - RUT - Bull Put Spread - 787.66
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.

CPTI January Position #2 - SPX - Iron Condor - 1418.30
We sold 12 January SPX 1300 puts and bought 12 January SPX 1285 puts for a credit of $.70 ($840). Our net credit is $.70 ($840). We also sold 12 SPX January 1470 calls and bought 12 SPX January 1485 calls for a credit of $.60 ($720). Total net credit and profit potential of $1.30 ($1,560). Maintenance is $18,000. Maximum profit range is 1300 to 1470.

CPTI January Position #3 - OEX - Bull Put Spread - 660.41
We sold 20 January OEX 615 puts and bought 20 January 605 puts for a credit of $.40 ($800). Maintenance is $20,000. We'll keep watch for an appropriate bear call spread to complete our potential Iron Condor.

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CURRENT FEBRUARY CPTI PORTFOLIO POSITIONS
CPTI February Position #1 - RUT - Bull Put Spread - 787.66
We sold 20 February RUT 690 puts and bought 20 February RUT 680 puts for a credit of $.55 ($1,000). Our net credit and profit potential is $.55 ($1,100). Maintenance is $20,000. If the market stops trending, we'll look for a bear call spread to complete our Iron Condor.

CPTI February Position #1 - SPX - Bull Put Spread - 1418.30
We sold 12 February SPX 1325 puts and bought 12 February SPX 1310 puts for a credit of $.70 ($840). Our net credit and profit potential is $.70 ($840). Maintenance is $18,000. 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).

ZERO PLUS POSITION -
Zero Plus - February Position - RUT - Bull Put Spread - 787.66
We sold 25 February RUT 690 puts and bought 20 February RUT 680 puts for a credit of $.55 ($1,375). Our net credit and profit potential is $.55 ($1,375). Maintenance is $25,000. If the market stops trending, we'll look for a bear call spread to complete our Iron Condor.

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CPTI SEMINAR SCHEDULE!
Dallas, TX - March 10 & 11
Washington, DC - April 21 & 22

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 - 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!

46 OUT OF 49 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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