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A QUESTION ASKED - THE LEARNING PROCESS BEGINS

HAVING TROUBLE PRINTING?
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Gee, Friday was such a nice day. Now we need a few more like it to give us a little more breathing room for our March positions. Over ten points down on the SPX and over nine points down on the RUT.

While Friday's down day was a welcome relief for our CPTI portfolios, those who put on Thursday's quickies better be on their toes. The relatively small ranges of our Iron Condors may be in for a rude awakening if the market continues down. That's why the quickies are dangerous trades. Things can happen quickly - and often do.

With only a week to go to February expiration, barring any catastrophic events, our CPTI portfolio is in pretty good position to end up 100% profitable for this cycle (as usual). We'll keep an eye on the SPX, though.

We're already positioned for the March cycle. We have complete Iron Condors on the SPX and RUT. We also have a bull put spread on the OEX, but there is rarely sufficient premium at safe levels for an OEX bear call spread to complete that Iron Condor. We'll likely just live with the bull put spread. However, that doesn't mean I won't be watching for opportunities.

April isn't that far off. When you're looking at the April option chains, note that April is a five week option cycle. That's why the premiums look pretty good. I don't think we're ready for April positions quite yet. However, a spike down could generate enough volatility and additional premium that might allow us a choice of strikes further out (and safer). I'll be watching for those as well.

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Mike - I am a new subscriber to your couch potato trader since late Jan'07.My first position with your system was the 1/25/07; March 850/860 $RUT bear call spread.

Since that time, the $RUT has gone against this position with minimal hesitation.

Is this position doomed? Is there a way to fix it now before it's too late or should I just sit on the couch; don't worry be happy? I know we have a lot of time, but the uptrend looks strong.

At worse I know it's not a big loss, but it's enough to concern me that I did something wrong. I would like to learn from this trade. - Tony

Hi Tony - Welcome to the CPTI family. Glad to have you with us. I particularly look forward to working with new members who want to learn. You will have plenty of opportunity.

Now, take a deep breath and chill out, my friend. Relax. The position isn't doomed. We may have to deal with it at some point, but not right away - especially after Friday's pullback. Even if we do, it's just a part of doing business. You'll learn that the market fluctuates and bounces up and down in every option cycle. That's why we create as large a cushion as possible - to give the underlying index room -- and to maintain some degree of sanity for traders prone to worry.

You may not have done anything wrong. It all depends on when you put on the RUT bear call spread. If you entered the spread when the position was originally suggested, then you did fine. However, if you didn't put on the spread until the RUT was five points (or more) higher, then you made a mistake.

If the RUT was five points higher, I wouldn't have suggested the position in the first place. Just because the position was announced five points before does not make it a good idea to put on once the market has moved against it. It reduces your chances for success, even though you may bring in a little extra premium. Along with the extra premium comes additional risk and a box of TUMS.

Also, I would have been reluctant to put on a bear call spread if I didn't already have a bull put spread in place. If you read my past columns (which I heartily suggest), you'll note that an Iron Condor almost always begins with a bull put spread. That is especially the case when the market is trending up. I suggested the bear call spread when it seemed like the market was rolling over. But, I was wrong. The market found some additional strength and has traded at new 52-week highs almost daily.

If you do miss a trade, just let it go. Don't chase it. Don't compromise the cushion, the strike prices. The market may come back to you and the position may become available again at the suggested levels.

You can, however, take some liberties in the premium you ask for. Be flexible. If I suggest a .65 credit limit, you may only be able to get $.60. Or, if the market moves slightly intraday in the other direction, you may be able to get $.70.

Some traders lack creativity when they put out their order at the suggested price and never budge. The positions I suggest aren't etched in stone. They are suggestions. A nickel, more or less, does not change the safety of the positions. But, arbitrarily moving to closer strike prices does alter the position's safety.

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CURRENT FEBRUARY CPTI PORTFOLIO POSITIONS
CPTI February Position #1 - RUT - Bull Put Spread - 807.11
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 - 1438.06
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 - 663.18
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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One Spot Left For Washington, Three Spots For Dallas
Currently, only one spot remains for Washington and five for Dallas. It's an experience you'll not forget and the knowledge will last a lifetime. What are you waiting for?

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CURRENT MARCH CPTI PORTFOLIO POSITIONS
CPTI March Position #1 - RUT - Iron Condor - 807.11
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 - 663.18
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.

CPTI March Position #3 - SPX - Iron Condor - 1438.06
We sold 12 March SPX 1335 puts and bought 12 March 1320 puts for a credit of $.65 ($780). Then we sold 10 March 1490 calls and bought 10 March 1505 calls for a credit of $.80 ($800). Total net credit is $1,580. Maintenance is $18,000 - 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. We have now generated $51,050.

ZERO PLUS POSITION -
Zero Plus - February Position - RUT - Bull Put Spread - 807.11
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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