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NEW JULY CPTI TRADE

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NEW CPTI JULY POSITION

Lately, the market doesn't seem to do anything in moderation. Down 20, up 10 - a steady diet of volatility. It almost makes me long for the days of the VIX at 10 and the market not doing much of anything. There was less premium, but less aggravation. I guess it's a trade-off.

We just have to focus on establishing our positions with substantial cushions and high probabilities of success. If we hold off putting on positions, we find ourselves in a state of paralysis. The other school of thought is that, if we don't like the way the market is trading, we should just step aside and wait until the trading environment is more to our liking. As it is, it looks like the market may have another day or two higher until it tests again.

Tonight, let's look at the Russell. It's trading at 839.81.

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New CPTI July Portfolio Position #3 - RUT - Iron Condor


With the RUT at 839.81 on 6/21, lets:
Sell 20 July RUT 770 puts - RUTSN
Buy 20 July RUT 760 puts - RUTSL
Credit of about $.55 ($1,100)

Sell 20 July RUT 900 calls - RUZGT
Buy 20 July RUT 910 calls - RUZGV
Credit of about $.40 ($800)

 

Total net credit and profit potential of about $.95 ($1,900). We have a maximum profit range of 130 points - from 770 to 900. Our maintenance is $20,000.

The volatility (VIX) is a little higher now - 14.21. As you may notice, we're putting on this trade with only about four weeks to expiration. The 130 point profit range is reasonable as we anticipate the sellers and buyers will battle it out until one side gives up. Then, there may be some blood in the streets, but probably not for awhile. I'd like another 10 or 20 points on each side, but in life we rarely get exactly what we want. This trade isn't bad for four weeks of exposure.

Look at the deltas of the short options. The delta of the 770 put is -4. That can interpreted that there is a 4% probability that the RUT will close below 770. Conversely, there is a 96% chance that the RUT will be above 770. Now, look at the 900 call. The delta is 9. That means that there is a 91% mathematical probability that the RUT will settle below 900. If you believe in this stuff, we should be able to sleep pretty well with this trade. But, as they say in the old west, "Pardner, you better sleep with one eye open and your gun under the pillow."

The above figures are based on Thursday's closing prices. It will likely be different when the market opens tomorrow. That's why you have to be flexible. Use the above trade numbers as a guideline and be ready to adjust the credit limits if necessary. Trading our strategies is not all black and white. If you're going to take this method seriously, you can't just throw the above numbers out there and expect to get filled. There is a reasonable chance it may happen, but it may not. Gee, what will you do if you don't get filled? As CPTIers should be aware of by now, the RUT can be bleeping stingy when it comes to negotiating premium.

If there's a huge gap in the morning, in either direction, you may even have to adjust the strike prices up or down if the gap is large enough. This experience is so valuable. These maneuvers are just one of the many things we go over in depth at the seminar. I'll be announcing a new seminar date soon. Stay tuned.

In the meantime . . . be smart, be flexible and be careful.

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S&P 500 Support & Resistance: Closed at 1522.19
Resistance:
1528 is the March 2000 closing high
1541 is the June high.
The upper trendline of the channel at 1545
1553 intraday high from March 2000 is the all-time index peak

Support:
1519 is the late November to February up trendline
1500 from April 2000 peak
The 50 day EMA at 1501
1475 from peaks in December 1999 and January 2000
1461.57 is the February 2007 high.
1440 is the mid-January high

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CURRENT JULY CPTI PORTFOLIO POSITIONS

CPTI July Position #1 - SPX - Iron Condor - 1522.19

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 - 1522.19

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.

NEW ZERO PLUS POSITION - See the suggested position above in today's newsletter, but let's use 30 contracts instead of 20.

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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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