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HERE WE GO AGAIN - S.S.D.D.

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HERE WE GO AGAIN - S.S.D.D.

Unbelievable! That's all I can say. In Thursday night's column, I wrote that our August positions were relatively comfortable with about two weeks left to expiration. Then it happened. FEAR. That's the primary market mover and it did a number on us Friday afternoon. Short selling played a part in Friday afternoon's madness.

Selling short, especially in a fearful market, used to be more difficult. It required that a short sale could only be executed on what is called an "uptick." That means a trader could only sell short if the previous trade was higher than the one prior. The uptick rule was created about 75 years ago to prevent short sellers from adding downward momentum to a sharply falling market.

It's estimated that about 25% of the NYSE's volume is short selling. It used to be years ago that selling short was pessimistic and considered un-American. While idealistic, it wasn't realistic, but it was sort of sweet. Well, those sentiments are history. Who does most of the short selling? It's not individual traders. It's estimated that institutions are responsible for about 75% of the short selling. So much for patriotism and optimism.

This "uptick" rule was recently abolished on July 6th. Then, less than a month later, right on cue, the market becomes a black hole, now filled with short sellers feeding off the fear of the rest of the market and our hard earned dollars circling the bowl. This no uptick rule has added a new dimension of volatility to the marketplace. The declines are apparently be more violent. But, when these same short sellers are forced to cover their short positions, the market can spike up more dramatically as well.

Is there an end in sight to this market fall? Well, there are those who anticipate the Fed making a move to lower interest rates. Some expect it to happen as early as Monday. Others say it may happen at the regularly scheduled Fed meeting this coming Tuesday. Then again, the Fed may only adjust their wording after standing pat. Whatever they're going to do, I hope they do it pretty soon - at least while our positions still have a fighting chance.

What About Our Positions?
That being said, what are we facing with our positions? The one that is being threatened is our August 740/730 bull put spread. The rut closed at 755.42 on Friday. For those who are considering an adjustment at this point, here's food for thought. These are all based on Friday's closing prices.

Choice A: Roll down in August
1) Close the 20-contract August 740/730 bull put spread position for about $3.00 ($6,000)
2) Open a new 30-contract August 720/710 bull put spread position for about $1.20 ($3,600)
3) Open a new 30-contract August 800/810 bear call spread position for about $1,000 ($3,000)

Choice B: Roll down & out to September.
1) Close the 20-contract August 740/730 bull put spread position for about $3.00 ($6,000)
2) Open a new 30-contract September 670/660 bull put spread for about $1.20 ($3,600)
3) Open a new 30-contract September 840/850 bear call spread position for about $1.10 ($1,100)

Once again, our exposure (and maintenance) in this position increases another 10 contracts (or 50%). If you choose to roll to September, you have to wait an additional four weeks, but we give the market an 85-point cushion to the downside and the upside - a total of an 170 point cushion. Would we put on that position right now if we weren't rolling a threatened position? Probably yes.

There are very wide bid/ask spreads - especially in the SPX. They are tough to figure out just how much premium to negotiate. Our SPX position is still 33 points away. It's far from safe, but at least the danger is not imminent.

Our other two previously adjusted positions might have to be dealt with before the bounce that we expect. Right now, it looks like a rollout to September might be a better alternative, since we have limited additional maintenance. Also, the extra four weeks may be enough time for calmer heads to prevail. Right now, the heads (or other body parts) aren't calm at all.

September Position
Early on Friday I suggested a new September CPTI position - originally the SPX 1260/1250. It took awhile, but orders started to be filled at $.50. Some, who put in a higher credit limit, were able to get filled when the market decline accelerated. We still have a 173 point cushion. I think it's safe, so far.

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NEW SEMINAR DATE ANNOUNCED

Seattle (Oct. 20th & 21st)
We will venture to Seattle, WA this fall. The dates are Saturday & Sunday, October 20th & 21st. Seattle is supposed to be a great place to visit. The early bird special for the Seattle seminar is in effect until September 1st. Take advantage and save $100. It's a hell-of-a-deal.

There are three "retake" spots available for the Seattle seminar. These retake spots are free for those who have paid to attend one of my previous seminars and who want to retake the seminar a second time. They're reserved on a first come first serve basis. These spots go fast.

Charlotte (Sept. 22nd & 23rd)
Don't wait to make your reservation. The seats go quickly and you'll want to take advantage of the $100 early bird savings if you complete your reservation before August 15th.

There are two "retake" spots remaining for the Charlotte seminar. These retake spots are free for those who have paid to attend one of my previous seminars and who want to retake the seminar a second time. They're reserved on a first come first serve basis. These spots go fast.

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CURRENT AUGUST CPTI PORTFOLIO POSITIONS
CPTI August Position #1 - RUT - Bull Put Spread - 755.42

On 6/29, with the RUT at 844, we sold 20 August RUT 740 puts and then bought 20 August RUT 730 puts for a credit of $.45 ($900). Total net credit and profit potential of about $.45 ($900). Our maintenance is $20,000. We'll look for opportunities to complete our Iron Condor if/when the market pops up.

CPTI August Position #2 - SPX - Iron Condor - 1433.06

On 7/3, with the SPX at about 1524.50, we sold 12 August SPX 1400 puts and bought 12 August SPX 1385 puts for a credit of $.65 ($780). Then we sold 12 August 1615 calls and bought 12 August 1630 calls for a credit of $.80 (960). The total net credit of $1.45 and profit potential is $1,740. Maintenance requirement is $18,000.

CPTI August Position #3 - RUT -- Iron Condor - 755.42

On 7/19, with the RUT at about 851, we sold 20 August RUT 770 puts and bought 20 August RUT 760 puts for a credit of $.45. The credit so far is $.45 ($900). Our maintenance is $20,000. We'll see if it's prudent to put a bear call spread on the topside to complete our Iron Condor.

Adjustment: On 7/26, we closed the original 20-contract bull put spread position and established a 30-contract Iron Condor consisting of the 730/720 bull put spread and the 850/860 bear call spread. Maintenance is now $30,000 and the new maximum profit range is 730 to 850. The profit potential of $900 remains the same.

CPTI August Position #4 - MID - Iron Condor - 840.53

On 7/23, with the MID at 916, we sold 20 August MID 850 puts and bought 20 MID August puts for a credit of $.50 ($1,000). The credit so far is $.50 ($1,000). Our maintenance is $20,000.

Adjustment: On 7/27, we closed the original 20-contract bull put spread position and established a 30-contract Iron Condor consisting of the 820/810 bull put spread and the 920/930 bear call spread. Maintenance is now $30,000 and the new maximum profit range is 820 to 920. The profit potential is now about $600.

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CURRENT SEPTEMBER CPTI PORTFOLIO POSITION

CPTI September Position #1 - RUT - Bull Put Spread - 755.42

On 7/24, with the RUT at 822.70, we sold 20 September RUT 700 puts and bought 20 September RUT 690 puts for a credit of $.70 ($1,400). Total net credit and profit potential (so far) of about $.70 ($1.40). Our maintenance is $20,000. We'll look for opportunities to complete our Iron Condor if/when the market pops up.

CPTI September Position #2 - SPX - Bull Put Spread - 1433.06
On 8/3, with the SPX at about 1463, we sold 20 September SPX 1260 puts and bought 20 September 1250 puts for a credit of $.50 ($1,000). Our maintenance is $20,000. We'll look for opportunities to complete the Iron Condor if/when the market bounces.

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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. With the July profits, our new cash total is $55,060 ($52,210 $2,850).

ZERO PLUS POSITION -

RUT - June Iron Condor - 100% PROFITABLE

On 6/21, with the RUT at 839.81, we sold 30 July RUT 770 puts and then bought 20 July RUT 760 puts for a credit of $.55 ($1,650). Then we sold 30 July RUT 900 calls and bought 30 July RUT 910 calls for a credit of about $.40 ($1,200). Total net credit and profit potential of about $.95 ($2,850). We were 100% profitable and pocketed $2,850.

We'll be looking to put on a new Zero Plus position soon.

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CPTI SEMINAR SCHEDULE!

SEPTEMBER 22nd & 23rd - CHARLOTTE, NC

OCTOBER 20TH & 21ST - SEATTLE, WA


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 personally call you with all the pertinent information. The price is a bargain - ONLY $995.00 -- less than the profit from one Iron Condor trade. Take advantage of the "early bird special" and save $100. You'll have a two-day experience that you'll remember, and profit from, for a lifetime. I limit my 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!

52 OUT OF 56 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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