Option Investor
Updates

WHEN IT'S TIME TO GO

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I frequently receive emails asking about our exit and/or adjustment strategies when a position is threatened. Many would like a one-size-fits-all answer as to when to get out. It's not that simple. As I've said many times before, there are a number variables that enter into the equation - risk tolerance, account size, support & resistance levels, moving average lines, trend lines, your personality & sleeping habits, and more. There are as many different exit points as there are traders.

There are many subscribers who figure they'll take the easy way out and exit the position when I send out a posting. My exit points are based on a combination of all of the above mentioned variables and my gut instinct. Occasionally, I will hold positions longer than most and, for others, will GTFO too soon. These are my criteria. Experience and education will help you blend these elements. It's not a science, but a facet of our trading that one should develop as soon as possible.

I'm always interested in new approaches to exiting positions. At my seminars, we toss around and analyze a number of ideas - some more simple than others. Below is one of the strategies. The seminar grad who submitted this claims it has worked well for him in the past. See what you think. Maybe it will help you in establishing your own GTFO point.

Iron Condor Exit Strategy:
The establishment of an exit strategy and its placement is more important than establishing an Iron Condor (IC) trade in terms of being consistent with a seasoned trader approach.

When an Iron Condor is established, we concentrate on the short strike prices and the distance from the short strikes to the underlying. Equally important is the establishment of the stop loss point, or the (GTFO) point, where it has to be closer to the underlying price than the short strike price. The determination of the GTFO point should be established when the original Iron Condor trade is placed and not left till the trade gets in dangerous territory (Code Blue territories) to avoid the effect of emotions into the decision making at that point.

Here are some guidelines that can help in exiting a trade. Remember that the short strike price is not the GTFO point. The GTFO point is closer to the underlying price than the short strike.

The Guidelines are:
The Call Side:
The GTFO point is 9 points below the short strike price.

The Put Side:
The GTFO point is 14 points above the short strike price.
So, for example, if the SPX is at 1400, and you have sold the 1470 call, then your GTFO would be (1470 - 9 )= 1461.
If you have sold the 1315 put, then your GTFO would be (1315 14)=1329.

Above apply only to the SPX and not to the RUT. If this to be applied to the RUT, then a percentage calculation would be implemented adjusted for the higher volatility of the RUT.

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Thursday Night's Recommendation
Thursday night I submitted a column with a new OEX position for March. Due to some technical difficulties, which have been fixed, the column was not sent out until Friday - not leaving sufficient time for many subscribers to act on the recommendation. Still, over 800 contracts were traded in the spread options. Hopefully, the position will still be available on Monday.

In the meantime, for those of you weren't able to enter the position, watch for the opportunity to get the 615/605 for $.40 if the market opens down big on Monday. If not, Thursday's 20 contract OEX 620/610 bull put spread recommendation for about $.45 should be just fine.

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CURRENT FEBRUARY CPTI PORTFOLIO POSITIONS
CPTI February Position #1 - RUT - Bull Put Spread - 788.14
We sold 20 February RUT 690 puts and bought 20 February RUT 680 puts for a credit of $.55 ($1,100). 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 - Iron Condor - 1422.18
We sold 12 February SPX 1325 puts and bought 12 February SPX 1310 puts for a credit of $.70 ($840). On Jan. 8, we also sold 12 February SPX 1475 calls and bought 12 February 1490 SPX calls for a credit of $.75 ($900). Our net credit and profit potential is $1.45 ($1,740). Maintenance is $18,000.

CPTI February Position #3 - OEX - Bull Put Spread - 660.35
We sold 20 February OEX 615 puts and bought 20 February 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 MARCH CPTI PORTFOLIO POSITIONS
CPTI March Position #1 - RUT - Bull Put Spread - 788.14
We sold 20 March RUT 700 puts and bought 20 March RUT 690 puts for a credit of $.65 ($1,300). Then, on 1/25, we sold 20 March RUT 850 calls and bought 20 RUT 860 calls for a net credit of $.45 ($900). Our net credit and profit potential is $1.10 ($2,200).

CPTI March Position #2 - OEX - Bull Put Spread - 660.35
We sold 20 March OEX 620 puts and bought 20 March 610 puts for a credit of $.45 ($900). Maintenance is $20,000. We'll keep watch for an appropriate bear call spread to complete our potential 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.

ZERO PLUS POSITION -
Zero Plus - February Position - RUT - Bull Put Spread - 788.14
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

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. 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!

47 OUT OF 50 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?

Note to the hundreds of former CPTI seminar graduates: There are no free retake spots remaining for Dallas or for Washington, DC. He who hesitates . . . is SOL.

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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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