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THOUGHTS ON EXPIRATION WEEK

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It looked like the market was going to hang on and cut its losses for the day on Friday, but the session lasted a half hour too long. The financial sector and a bit of short covering tried to hold up the market, but didn't have much help. Ultimately, traders preferred to go into the weekend in cash, so they sold hard and the S&P gave up about 20 SPX points in the last half hour.

We have to prepare for the week ahead. It seems poised for a nice relief bounce, but part of that is wishful thinking. Once the bounce begins, more short covering should add fuel to the fire. But, if we get the bounce, don't get complacent. There are still four trading days and the Friday morning settlement left to expiration. Even if we get the bounce, we're not necessarily out of the woods. We're still in a downtrend and we're way below support levels that we were counting on earlier in the week. Now, these support levels have become resistance levels.

OK, enough of the technical B.S. Let's prepare for the worst. To do that, we'll explore the possibility of a close out and roll out strategy. For you newbies who haven't been through this before, you might want to print out today's column so you'll have it to refer to when we're in this position again - and it WILL happen, guaranteed.

Russell 2000
The RUT is at 772 - 32 points above our 740/730 bull put spread. With the market moving in chunks, many are concerned. If you want to GTFO now, here is the process (based on Friday's closing prices). There are other close out/adjustment methods (which we discuss in depth at the seminar), but this method is quite popular.

1. Unwind (close out) the 20 contract November RUT 740/730 bull put spread for about $1.65.

2. Look for a safe (hopefully) December Iron Condor that will help to replenish the $1.65 we just spent to unwind our November 740/730 spread. Keep in mind that, even before we close out the November bull put spread, we will have already located the new position. It takes a bit of research and number crunching, but it's certainly not rocket science. If this is too tough for you, it's time to give up trading and start selling your trading books and silverware on Ebay.

For our roll out position, we picked 20 contracts of the December 660/650 bull put spread and the 860/870 bear call spread for a total credit of about $1.70. That's a 200 point maximum profit range, but there are those who would be even more conservative. If you want to be even safer, you could widen the range using further OTM spreads and take in a less premium. To replenish the premium spent, you have the option of trading some additional contracts. More aggressive traders may want to reduce the maximum profit range and take in some additional premium. Different strokes for different folks.

If the downdraft in the market had happened earlier in the November option cycle, we would have began our search to roll out in the November cycle. But, with only about a week left, there's not a reasonable position to be had. "Reasonable" is certainly subjective.

As I hope you've noticed, I present various alternatives for threatened positions. Each trader will have to make his own exit decision based on account size, risk tolerance, position size, and sleeping habits. It takes some thought, some preparation and, most importantly, the ability to make your own decisions.

S&P 500
The SPX is at 1453 - about 28 points above our SPX 1425/1425 bull put spread. The same concepts hold true for this SPX position as the above RUT position. So, here we go:

1. Unwind (close out) the 20 contract November SPX 1425/1415 bull put spread for about $2.50.
2. An interesting Iron Condor roll-out position is the December SPX 1325/1315 bull put spread and the 1555/1565 bear call spread for about the same $2.50. That's about a 230 point maximum profit range for the new SPX Iron Condor - pretty juicy.

With the bid/ask spreads so high, those of you who don't understand the negotiation process, you should consider attending the two day seminar. We spend hours learning, and using, the negotiation method on real time option examples and real time positions.

New Positions?
Some traders may want to consider the above two roll-out Iron Condor as new positions for the December cycle. Keep in mind that December is one of those seemingly endless five-week cycles. Also remember, before you jump into more December positions, make sure you have enough maintenance capital available in case you have to make some adjustments to the November positions. Keep some powder dry - just in case. Some traders use gun powder while Couch Potatoes tend to use flour or pancake mix. Whatever works.

Based on the above adjustments, you wouldn't have to trade any additional contracts, so the November maintenance would just shift to December.

Quickie Update
For the moment, both November Quickie positions are still viable. Who knows? Those Quickie risk-takers just might get lucky again - like last month.

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SEMINAR DATES -
CHICAGO - JANUARY 26 & 27
LOS ANGELES - DEC. 8 & 9

Chicago is the most centrally located and most accessible location. We've been there twice before and filled the room. I've chosen a hotel convenient to the airport - eliminating the need to rent a car. You take the airport shuttle right to the hotel, convenient and easy. Take advantage of the early bird special and save $100. See the details below.

Join us as we discuss, trade selection, entry points, exist strategies and alternatives, premium negotiation, maintenance alternatives, taxes, and much more - all subjects necessary to enlighten and to maximize your trading business. As you know by now, the seminars typically sell out. As in trading, opportunities aren't there for long. Reserve your spot as soon as possible.

No more retake spots are available for the Los Angeles seminar. There is now a waiting list for possible cancellations. Contact me if you would like to be on the waiting list. Thus far, there are two people on the waiting list.

SAVE $100 - EARLY BIRD SPECIAL
Chicago - If you complete your registration for the upcoming Chicago seminar prior to December 14th, you will save $100 only $895. If you've been paying attention to my column, by now you know that every $100 you save is $150 you don't have to make. Plus, it's likely deductible for you.

There are now only two retake spots available for the Chicago seminar. These spots go quickly. Contact me as soon as possible if you would like to join us.

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CURRENT CPTI NOVEMBER Position #1 - SPX - Bull Put Spread - 1453.70
On 10/9, with the SPX at 1553.50, we sold 20 November SPX 1425 puts and bought 20 November SPX 1415 puts for a credit of $.50 ($1,000). Maintenance is $20,000. We may put on a bear call spread in the future - IF it makes sense.

CPTI November Position #2 - RUT Bull Put Spread - 772.38
On 10/11, with the RUT at 835, we sold 20 November RUT 740 puts and bought 20 November RUT 730 puts for a credit of $.50 ($1,000). Maintenance is $20,000. We may put on a bear call spread in the future - IF it makes sense.

CPTI November Position #3 - MID Bull Put Spread - 861.55
On 10/16, with the MID at 902, we sold 20 November MID 820 puts and bought 20 November MID 810 puts for a credit of $.50 ($1,000). Maintenance is $20,000. We may put on a bear call spread in the future - IF it makes sense.

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CPTI December Position #1 - RUT Bull Put Spread - 772.38
On 11/1, with the RUT at 806, we sold 20 December RUT 690 puts and bought 20 December RUT 680 puts for a credit of $.70 ($1,400). Maintenance is $20,000. We may put on a bear call spread in the future - IF it makes sense.

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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 -

CPTI Zero-Plus Position #1 - RUT Bull Put Spread - 772.38
On 10/11, with the RUT at 835, we sold 30 November RUT 740 puts and bought 30 November RUT 730 puts for a credit of $.50 ($1,500). Maintenance is $20,000. We may put on a bear call spread in the future - IF it makes sense.

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CPTI SEMINAR SCHEDULE!

LOS ANGELES, CA - DECEMBER 8 & 9

CHICAGO, IL - JANUARY 26 & 27


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 will 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!

54 OUT OF 59 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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