Option Investor
Updates

READY TO STRADDLE THE MARKET?

HAVING TROUBLE PRINTING?
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Our positions seem pretty secure with four trading days and the Friday settlement left. Many of those who profess to know, are expecting a dramatic reaction to the Fed announcement. One thing is for sure, the Fed can't satisfy everyone. Whatever the announcement, some will be happy and others will be pissed. But, it's not the Fed's job to try to appease everyone.

There are some traders who are straddling the market in the hopes of profiting from a large move, one way or the other. One of the strategies I teach in depth at my seminars is the Low Risk Straddle. Basically, we buy an ATM straddle 5-6 months out and we're out of the trade within 30 days. For those who feel daring and believe there will be a big move, here's another hypothetical trade - this one is on the $MNX (tracks the $NDX).

Buy 10 November MNX 200 puts at about $7.20
Buy 10 November MNX 200 calls at about $8.90
Total debit of about $16.10

If we get out of the trade in 30 days or less, we're only risking about 10% of the initial debit - or about $1.60. For 10 contracts, that's $1,600. Those who don't want to risk $1,600 can simply reduce the number of contracts.

If the Fed disappoints, the MNX can go down 20 points in a heartbeat. That's the NDX going down 200 points. That would put the value of the MNX at about 180. The value of the MNX 200 puts would be about $20.00 and the MNX 200 calls at about $2. Closing out both would bring in about $22. The trade originally cost $16.10. That leaves a profit of $5.90 (x 10 contracts = $5,900).

I typically teach this strategy using biotech companies as examples because the FDA approval or rejection announcements usually result in a very fast move in one direction. Some traders use earnings announcements for volatile companies (GOOG etc.).

I'll reprint the Low Risk Straddle column in the near future so you can get a more complete understanding. But, you can see that this is an excellent non-directional strategy for very little risk. It's a good strategy to keep in your arsenal.

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Siamese Progress - Time To Close?
Here's another update on the hypothetical Siamese Condor I discussed back on 9/2. This is in response to emails from those who went ahead and put on this trade - using REAL money.

Our short puts and calls were at 685. Our long calls were at 735 and our long puts were at 635. Let's take a look and see how the trade is progressing. We'll check out the values of each of the four options.

XEO 685 put: Buy Back @ about $5.20
XEO 685 call: Buy Back @ about $15.00
XEO 735 call: No Value
XEO 635 put: Sell @ about $.20

We took in a net credit of $24.00 when we initiated the trade. The OEX is at 694.38 as of Friday's close. It would cost us (at this point in time) $20.00 to unwind the spread. That would leave us a profit of $4.00 x 4 contracts = $1,600.00.

After the market opens on Monday, if there's not a huge downdraft to increase volatility, it should be even less to unwind the spread. We're in the last five days of the cycle and the premium should erode quite quickly.

If you decide to close out the spread, there's no need to sell the 735 call because, at the moment, it has no value. Look at it as a lottery ticket. If the Fed surprises and cuts the interest rate by 50 basis points on Tuesday, the market might spike higher and the 735 call may have some value.

On the other hand, if you choose to hold onto the 635 put, instead of selling it for $.20, and the Fed disappoints, the market might tank, driving up volatility and the potential value of the 635 put.

Decisions, decisions, decisions . . .

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S&P Support and Resistance - Closed at 1484.25
Resistance:
1490.72 is the early June closing low and early August peak.
1492 is the July 2006/March 2007 up trendline
The 90 day SMA is at 1497
1534 is the early July high
1539 is the mid-June intraday high
1541 is the early June high.
1553 intraday high from March 2000 is the all-time index peak

Support:
The 50 day SMA at 1481
The 50 day EMA at 1475
1475 from peaks in December 1999 and January 2000
1461.57 is the February 2007 high.
The 200 day SMA at 1462
1440 is the mid-January high
1427 represents some interim peaks from December 2006 and the early August low
1406 - 1407 from March 2007 and November 2006 interim peaks
1389 from October 2006 interim peak
1375 - 70 from March 2007 low
1370 is the August intraday low

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SEMINAR DATE - Only a week left to Charlotte

Charlotte (Sept. 22nd & 23rd)
There are still a few spots remaining for the upcoming Charlotte seminar.

There is one "retake" spot 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.

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CURRENT SEPTEMBER CPTI PORTFOLIO POSITIONS
CPTI September Position #1 - RUT - Bull Put Spread - 783.49

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 - 1484.25
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.

CPTI September Position #3 - RUT - Iron Condor - 783.49
(Formerly August Position) 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).

Adjustment: On 7/26, we closed the original 20-contract bull put spread position and established a 30-contract Iron Condor consisting of the 670/660 bull put spread and the 840/850 bear call spread. Maintenance is now $30,000 and the new maximum profit range is 670 to 840. The profit potential of $900 remains the same.


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CURRENT OCTOBER CPTI PORTFOLIO POSITION
CPTI October Position #1 - RUT - Bull Put Spread - 783.49

On 9/7, with the RUT at 775.53, we sold 20 October RUT 630 puts and bought 20 October RUT 620 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.

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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 - New Position To Be Announced Soon

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CPTI SEMINAR SCHEDULE!

SEPTEMBER 22nd & 23rd - CHARLOTTE, NC


Take your trading from a "hobby" to a 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 57 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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