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LIKE NIGHT AND DAY AND NIGHT AGAIN

HAVING TROUBLE PRINTING?
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What a difference a day makes! Good name for a song. Not a big thrill in the market - especially for those who are still in a short SPX bear call spread positions. Just when we thought it was safe to go back in the water, we find ourselves swimming with the sharks again.

After three days of selling, the buyers jumped in and took back almost 17 points of the decline. It looks like a large portion of that gain might have been the result of short covering before the weekend. In other words, it's likely that the selling is not over. This last week was not typical of the previous pullbacks. It has a more negative tone to it. But, what the hell do I know? That's why we trade non-directionally - so we don't have to make these "educated" guesses.

So, we're facing a loss of over $7,000 this month - figuring our remaining June positions settle profitably. Since we're going to have a loss anyway, let's see if we can mitigate at least part of the June loss by putting on a quickie of our own. But, it's not the risky quickie similar to those we wrote about on Thursday. Let's see if we can come up with a Butterfly Net scenario that will offer us a good risk reward - in anticipation that the SPX will move lower during the final week of this June cycle. Based on Friday's closing numbers, the projected risk on this trade will be about $550. The potential profit, if the SPX settles in our sweet-spot, is $2.45 ($3.00 - $.55). Remember, this does not factor in commissions, which might amount to about $85.

So, here goes. With the SPX at 1507.67 and the XSP at 150.77, we're going to put on a Butterfly Net. Go back to my May 27th column for a comprehensive discussion of this strategy.

This IS an official June CPTI portfolio position. Let's:

Buy 10 June 150 puts - XSLRT
Sell 20 June 148 puts - XSLRR
Buy 10 June 146 puts - XSLRP
Debit of $.30 ($300)

Buy 10 June 149 puts - XSLRS
Sell 20 June 147 puts - XSLRQ
Buy 10 June 145 puts - XSKRO
Debit of $.25 ($250)

Total net debit of $.55 ($550). Our total risk on this trade is the $550 (plus commissions) we spent to put it on. Our break-even points are 145.55 on the bottom and 149.45 on the top side. If it settles anywhere in that range, we'll make some money. We'll make the maximum profit ($2.45 or $2,450) if XSP closes between 147 and 148.

If we have an opportunity to close out the positions early for a nice profit, we may take advantage of it. That would consist of buying back the short puts on one, or both, of the butterflies. Most likely, we will allow it to go to Friday morning's settlement and let the cash settlement do the work for us. XSP options are European style, so we will be subject to the monthly craziness we call the Friday morning settlement. And, if you haven't already figured it out, the XSP represents 1/10th of the S&P 500 index.

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S&P 500 Support & Resistance - Closed at 1507.67
Resistance:
1510 is the late November to February up trendline
The 18 day EMA at 1515
1520 from the September 2000 peak
1528 is the March 2000 closing high
1553 high intraday from March 2000 all-time index peak
The upper trendline of the channel at 1540

Support:
1500 from April 2000 peak
The 50 day EMA at 1492
1475 from peaks in December 1999 and January 2000
1461.57 is the February 2007 high.
1440 is the mid-January high
1439 is the March high
1432 is the December 2006 high
1425 is an interim high from November 1999
1410 is the 'hump' high

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An Oldie, But A Goodie

A husband takes his wife to play her first game of golf.....
Of course, the wife promptly hacked her first shot right through the window of the biggest house adjacent to the course. The husband cringed, 'I warned you to be careful! Now we'll have to go up there, find the owner, apologize and see how much your lousy drive is going to cost us.'

So the couple walked up to the house and knocked on the door. A warm voice said, 'Come on in.' When they opened the door they saw the damage that was done: glass was all over the place, and a broken antique bottle was lying on its side near the broken window. A man reclining on the couch asked, 'Are you the people that broke my window?'

'Uh...yeah, sir. We're sure sorry about that,' the husband replied. 'Oh, no apology is necessary. Actually I want to thank you. You see, I'm a genie, and I've been trapped in that bottle for a thousand years. Now that you've released me, I'm allowed to grant three wishes. I'll give you each one wish, but if you don't mind, I'll keep the last one for myself.'

'Wow, that's great!' the husband said. He pondered a moment and blurted out, 'I'd like a million dollars a year for the rest of my life.' 'No problem,' said the genie. 'You've got it, it's the least I can do. And I'll guarantee you a long, healthy life!'

'And now you, young lady, what do you want?' the Genie asked. 'I'd like to own a gorgeous home complete with servants in every country in the world,' she said.

'Consider it done,' the genie said. 'And your homes will always be safe from fire, burglary and natural disasters!'

'And now,' the couple asked in unison, what's your wish, genie?' 'Well, since I've been trapped in that bottle and haven't been with a woman in more than a thousand years, my wish is to have sex with your wife.'

The husband looked at his wife and said, 'Gee, honey, you know we both now have a fortune, and all those houses. What do you think?' She mulled it over for a few moments and said, 'You know, you're right. Considering our good fortune, I guess I wouldn't mind, but what about you, honey?'

You know I love you sweetheart,' said the husband. I'd do the same for you!'

So the genie and the woman went upstairs where they spent the rest of the afternoon enjoying each other.

The genie was insatiable. After about three hours of non-stop sex, the Genie rolled over and looked directly into her eyes and asked, 'How old are you and your Husband?'

'Why, we're both 35,' she responded breathlessly.

'No Kidding.' He said, 'Thirty-five years old and both of you still believe in genies?'

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CURRENT JUNE CPTI PORTFOLIO POSITIONS

CPTI June Position #1 - RUT - Bull Put Spread - 835.31

On 5/1, we sold 20 May RUT 720 puts and bought 20 May RUT 710 puts for a credit of $.50 ($1,000). Maintenance is $20,000. We will watch for an opportunity to add a bear call spread to this position to complete our Iron Condor.


CPTI June Position #2 - SPX - Iron Condor - 1507.67

On 3/28, with the SPX at about 1419, we sold 12 May SPX 1300 puts and bought 12 May SPX 1285 puts for a credit of $.70. Then we sold 12 May SPX 1505 calls and bought 12 May SPX 1520 calls for a credit of $.70. Our net credit and profit potential was $1.40 ($1,680). Our maximum profit range is 1300 to 1505. Our total maintenance was $18,000.

On 5/3, with the SPX at about 1501, we rolled out our May position into June by buying back both spreads and establishing the 1535/1550 bear call spread and the 1410/1395 bull put spread for an additional credit of $380. We now have a profit potential of $2,060. On 5/31 closed out bear call spread for a loss of $10,180.

CPTI June Position #3 - RUT - Iron Condor - 835.31

On 5/7, we sold 20 June RUT 760 puts and bought 20 June RUT 750 puts for a credit of $.60 ($1,200). Then we sold 14 June 890 calls and bought 14 June 900 calls for a credit of $.50 ($700). Total potential profit is $1,900. Maximum profit range is 760 to 890. Maintenance is $20,000.

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CURRENT JULY CPTI PORTFOLIO POSITIONS

CPTI July Position #1 - SPX - Bull Put Spread - 1507.67

On 5/30, we sold 15 July SPX 1400 puts and bought 15 July SPX 1385 puts for a credit of $.70 ($1,050). On 6/4 we put on the bear call spread to complete our Iron Condor. We sold 15 July SPX 1625 calls and bought 15 July SPX 1640 calls for a credit of $.70 ($1,050). Our net credit and profit potential is $2,100. Our maintenance is still $22,500.

CPTI July Position #2 - SPX - Iron Condor - 1507.67

On 6/4, with the SPX at about 1536, we sold 12 July SPX 1440 puts and bought 12 July SPX 1425 puts for a credit of $.70. Then we sold 12 July 1625 calls and bought 12 July 1640 calls for a credit of $.70. The total net credit of $1.40 and profit potential is $1,680. Maintenance requirement is $18,000.

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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 new cash total is $49,610 ($51,050 - $1,440).

RUT Iron Condor - 835.31

On 5/7, we sold 25 June RUT 760 puts and bought 25 June RUT 750 puts for a credit of $.60 ($1,500). Then we sold 20 June 890 calls and bought 20 June 900 calls for a credit of $.50 ($1,000). Total potential profit is $2,500. Maximum profit range is 760 to 890. Maintenance is $25,000.

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CPTI SEMINAR SCHEDULE!

NEW DATES TO BE ANNOUNCED SOON.
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 to 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, 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. Send me your phone number. 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. You'll have a two-day experience that you'll remember, and profit from, for a lifetime. I limit our CPTI seminars to ONLY 25 ATTENDEES. And, as a bonus, if you attend one of my CPTI seminars, you are entitled to RETAKE the seminar a SECOND TIME at NO CHARGE!

51 OUT OF 54 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. 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 Trader 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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