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BENEFITS OF BEING "UNEVEN"

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It was a productive two day seminar here in Los Angeles. We spent hours going over our favorite strategies and we came up with some interesting potential trades for both December and January.

Let me preface the following trades by saying that the Fed will be deciding this week if, or how much, they will be cutting interest rates. These are often market moving announcements. Hence, you may want to wait to put on these trades until after the Fed meeting and the dust has had a chance to settle a bit.

Here are the trades we came up with:

CPTI January Position #2 - SPX Iron Condor
Sell 20 January SPX 1340 put - SXYMH
Buy 20 January SPX 1330 put - SXYMF
Credit of about $.60 ($1,200)

Sell 20 January SPX 1630 calls - SPBAH
Buy 20 January SPX 1640 calls - SPBAF
Credit of about $.55 ($1,100)

Total net credit and profit potential of $1.15 ($2,300). Maintenance is $20,000. The maximum profit range is 1340 to 1630. That's 290 points. Now, keep in mind that these figures are based on Friday's closing numbers. There's a good chance they will be different on Monday. That means you may have to use some common sense and creativity if you choose to enter these positions. Will you put on the bull put spread first and then the bear call spread later? Or vice versa? Will you put on all four legs at once for a total net credit?

We won't know the exact position until after the market opens. We will react and take what the market gives us - plus a little negotiation, of course. This is not the kind of trade that you want to put in the night before or before the market opens. Don't force the position. If we don't get a decent entry point, we won't put on the trade. It's true that our style of trading is pretty much hands off. But, putting on the trade requires some attention, some thought, some creativity and some flexibility. You can go to the beach after the trade is filled.

If we're able to successfully put on the trade, we'll also use it for the Zero-Plus ongoing strategy.

Reducing Risk with the "Uneven Condor"
We talked about the Uneven Condor this morning. That's when you're concerned about one particular direction of the Iron Condor. In this market, I'd be a little concerned with the upside. If the Fed eases 50-basis points, the market could go nuts to the upside.

Here's a suggestion on what you might do to establish a bit of added protection for the bear call spread.

Instead of buying 20 January 1640 calls, let's just buy 15. With the money we save, let's buy five (5) of the January 1620 calls instead. That would change the structure of our topside position. A bull call spread would be created. It would consist of:

Bull Call Spread:
Long five 1620 calls
Short five 1630 calls
Debit of about $1.05 ($525)

Bear Call Spread:
Short 15 1630 calls
Long 15 1640 calls
Credit of about $.55 ($825)

Net credit for total topside positions would now be $300 ($825 - $525). The total credit for both the topside positions and the bull put spreads is $1,500 ($1,200 $300).

How does that help? Well, let's do a little math. We'll construct a "what if" scenario.

What if the SPX settles in the money at 1635? Our 15 bear call spreads would cost us $7,500. On the other hand, our five bull call spreads would be worth $5,000. Our cost would then be $2,500 ($7,500 - $5,000). To calculate the net loss on the entire position, we now subtract the $1,500 of premium we took in originally. Our bottom line figure is a loss of only $1,000 ($2,500 - $1,500).

A loss of $1,000 is not hard to stomach. Without the five bull call spreads to lessen the impact, the position would had taken a hit of about $8,700. Not only does the "uneven" condor lower the risk, but it allows the trader to hold onto the position longer, if he chooses.

Typically, if the short strike price of a bull put spread is being threatened, we would likely close the position perhaps ten points from the short strike. With the "uneven" condor, the trader would be able to give the index a little longer to bottom and rebound.

There is also a perk when using the "uneven" condor. You are in a position to possibly make a nice additional chunk of money - IF you get a little lucky. If the SPX closes above 1620, but below 1630, our bull call spreads will have value. The best case scenario would have the SPX closing right at 1630. Then, the 15 bear call spreads would all expire worthless (the objective). However, the five 1620/1630 spreads would then have a value of about $5,000. It's a little having a lottery ticket.

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I Need Your Input
I'm planning one presenting a seminar on the East coast in mid-March. Let me know if the timing is good for you and if you'd be interested in attending. I'd like to finalize the arrangements in the next 4-5 days and I'd appreciate your input. I haven't been to the East coast since April of 2006 and the natives are getting restless. Contact me at Contact Support. Send me your phone number and I'll call you to go over the possibilities.

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SEMINAR DATE -

CHICAGO - JANUARY 26 & 27

Chicago is both centrally located and easily accessible. 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 - A WEEK LEFT!
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 is now only one retake spot 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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CPTI DECEMBER POSITIONS
CPTI December Position #1 - RUT Bull Put Spread - 785.52

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.

CPTI December Position #2 - SPX Iron Condor - 1504.66
On 11/16, with the SPX at about 1450, we sold 20 December SPX 1320 puts and bought 20 December SPX 1310 puts for a credit of $.90 ($1,800). Then we sold 20 December 1570 calls and bought 20 December 1580 calls for a credit of $.70 ($1,400). Total net credit and profit potential of $1.60 ($3,200). Maintenance is $20,000.

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CPTI JANUARY POSITION
CPTI January Position #1 - RUT Bull Put Spread - 785.52

On 12/4, with the RUT at 752, we sold 20 December RUT 620 puts and bought 20 December RUT 610 puts for a credit of $.60 ($1,200). 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 $56,560 ($55,060 $1,500).

ZERO PLUS POSITION - Watch for new position to be announced.

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CPTI SEMINAR SCHEDULE!

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!

55 OUT OF 60 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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