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A LOOK BACK & A LOOK FORWARD

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A LOOK BACK & A LOOK FORWARD

Sometimes you get the bear and sometimes the bear gets you. This month, the bear got us. It doesn't happen often - about once a year. It wasn't terminal - far from it. Even though it's a cost of doing business, it still hurts. We're still alive and well - physically and financially -- and our trading life and business goes on.

This month's settlement numbers were crazy - again. The S&P spiked up 11.12 from Thursday's close. The Russell was the worst offender, opening up 16.33 points. That may be the largest settlement differential on record. At any rate, it caught a lot of traders by surprise. The MID popped up by 9.96, which is also substantial.

If ever there was a process that should be eliminated, it would be the Friday morning settlement. I never have understood the purpose behind it. As far as I can see, it accomplishes nothing - and it leaves the door open for speculation about possible manipulation of the numbers.

With all the computers and other technology, why do you suppose it takes half of Friday for them to calculate some settlement numbers? Hell, it takes almost the full day for them to dream up the Russell number. Just makes one wonder.

I was looking back at our CPTI spreadsheet of trades. June was our first losing month since August 2005. That was quite a streak - 22 months. Can we do it again? I like our chances. By the way, if you'd like a copy of the up-to-date spreadsheet of trades going all the back to November 2002, just ask. I'll be glad to send it to you.

New Positions?
Friday, with the market so volatile, I didn't find any new compelling positions to suggest. I will be watching carefully the first part of this week for opportunities. I was disappointed that the market didn't pull back to make our new Butterfly Net position profitable. But, I still believe that the risk/reward of this strategy makes it worthwhile - and I'll likely put on another Butterfly Net in the near future.

For those of you who also find the strategy appealing, you can look at the 152-150-148 (about $.35) and 151-149-147 (about $.30) butterflies (based on Friday's closing prices). You may even be able to negotiate another nickel here and there.

For those who want to expand their profit range a bit further, you can consider widening the butterflies to three points (as opposed to two points). Look at the 152-149-146 (.45) and 150-147-144 ($.45). Notice that the debits are a bit higher, but that's the price we pay for increasing the potential profit.

The three-point Butterfly Net has a potential $4.00 (less the debit) profit while the two-point Butterfly Net has a potential $3.00 (less the debit) profit. Do the math. Both are decent choices. Those of you who believe the market will continue up, look at similar positions using calls with strike prices above where the SPX is trading.

The $XSP isn't the only index you can use for the Butterfly Net. For those of you who follow the DOW, you can use the $DJX options. There are plenty more.

I'll also be checking out the RUT - focusing on the puts. The 770/760 and 760/750 bull put spreads looks possible on a pullback. Remember, this is a 5-week cycle. Be careful, don't be greedy. Also, if you're not comfortable trading in this trending market, it's perfectly OK to sit back and wait. The market will be there when you're ready to jump back in.

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TRACKING CPTI PORTFOLIO RESULTS
We've just completed the seventh month (June) of CPTI tracking year number five. The market continued its up move and we took a hit. We ended up with only the fourth losing month out of the 55. Our loss for the sixth month of our fifth year was $3,000. Thus far, in our fifth tracking year, we've still accumulated a tidy profit of $12,390 ($20,220 - $7,830).

RECAP OF JUNE POSITIONS
(See Position Details in JUNE Summary Below)

RUT Iron Condor - PROFIT: $1,900
SPX Iron Condor - LOSS: $10,180
RUT Bull Put Spread - PROFIT: $1,000
XLS Butterfly Net - LOSS: $550

TOTAL JUNE LOSS: $7,830

June Settlement Numbers:
S&P 500: $SET - 1534.09
Russell: $RLS - 853.45
S&P 100: OEX - 704.53
MID: $MIV - 914.36
XSP: 153.40

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SUMMARY OF JUNE CPTI PORTFOLIO POSITIONS

CPTI June Position #1 - RUT - Bull Put Spread - 848.19

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. Profit: $1,000


CPTI June Position #2 - SPX - Iron Condor - 1532.91

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. Loss: $10,180.

CPTI June Position #3 - RUT - Iron Condor - 848.19

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 = $1,900. Maximum profit range is 760 to 890. Maintenance is $20,000. Profit: $1,900

CPTI June Position #4 - XSP - Butterfly Net - 153.29

With the XSP at 150.70, we put on two overlapping butterfly positions. Our out-of-pocket costs were $.55 ($550). We established a profit range of 145.55 to 149.45. Since this is a debit position, there is no maintenance requirement. Loss: $550

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CURRENT JULY CPTI PORTFOLIO POSITIONS

CPTI July Position #1 - SPX - Bull Put Spread - 1532.91

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 - 1532.91

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 $52,210 ($49.610 - $2,500).

RUT Iron Condor - 848.19

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. PROFIT: $2,500.


WATCH FOR NEW ZERO-PLUS POSITION -- TO BE ANNOUNCED SOON!

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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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